Basics of REITs

Understand real estate investing made easy. A REIT lets you own income-producing commercial property in units, without buying a building.

How a REIT works

A REIT owns and operates income-generating real estate — usually offices, malls or warehouses — and is required to distribute the large majority of its net distributable cash flow to unitholders.

What you get and give up

You get liquidity, professional management, diversification across tenants, and a small ticket size. You give up control, and you take on unit price volatility that physical property does not visibly have.

Reading the yield

Distribution yield is only part of the picture. Occupancy, lease expiry profile, tenant quality and debt levels determine whether that distribution is sustainable.

The risk position

REIT units are market-linked and their prices fluctuate. Distributions are not guaranteed and depend on the underlying properties actually earning rent.

Before you decide

Everything above is general. What is right for you depends on what you are protecting, what you already hold, and what you can sustain. That is a fifteen-minute conversation, and it is free.