REITs

REITs are products that raise funds from many investors by issuing stocks or beneficiary certificates, invest them in real estate or real estate-related securities, and distribute the profits to investors. In that they invest indirectly in real estate, they are similar in concept to real estate funds, but real estate investment trusts are subject to the Indirect Investment Act, whereas REITs are subject to the Real Estate Investment Company Act.

In addition, real estate investment trusts in the form of beneficiary certificates cannot be redeemed, so they cannot be resold midway until the underlying real estate is completed or sold, but since REITs are listed on the stock market, their liquidity is relatively high compared to real estate funds.

REITs can be bought and sold like any stock, and they also pay dividends twice a year. REITs are generally required to distribute 90% of their net income, which also makes the dividend income attractive. The dividend yield is usually 8–12%, and as the economy improves and rents rise, the dividend rate becomes even higher. Also, if the real estate is sold after the 3–5 year management period ends, investors can receive a liquidation dividend.

The return of a REIT investing in real estate can vary depending on the value of the target real estate, and funds investing in areas with somewhat lower profitability may have difficulty achieving their target returns. In addition, if the actual sale rate is low, the recovery of principal and interest may be delayed or losses may occur. Therefore, you should carefully examine what a REIT is investing in and how.