Getting into real estate is often considered to be a lucrative career path. But you don’t have to buy and sell properties to join this industry as a professional. You can enter a real estate investment trust (REIT) company or become a REIT investor.
Keep reading for the info you need to consider to decide if real estate investment trusts are good career paths for professionals like you.
Real estate investment trusts explained
A real estate investment trust or REIT is a group of funds or securities for real estate. REIT management companies oversee real estate acquisitions, sales and diversification.
Think of a REIT similarly to a mutual or exchange-traded fund (ETF). With a mutual fund, several stocks or securities are gathered together into a group. Investors can then purchase mutual fund shares rather than individual shares in the fund itself.
Similarly, with a real estate investment trust, investors can purchase partial ownership or shares of the trust, thus gaining the financial benefits of simultaneously investing in multiple pieces of real estate or other securities.
Through REITs, investors can invest in portions of real estate projects or properties and generate profits. Most real estate investment trusts are collections of properties such as hospitals, shopping malls, apartments and other large properties rather than single-family homes, though this is only sometimes true.
Real estate investment trusts are often attractive to investors because they don’t require those investors to finance, purchase or manage any properties by themselves. Instead, REIT companies and their employees handle all the details.
What does a REIT company do?
A REIT company acquires real estate properties and securities for its clients. It monitors the market, sells properties when necessary and continues to grow the collected trust and portfolios under its control for the financial prosperity of its clients.
A REIT company is similar to a mutual fund manager. They take care of the day-to-day monitoring of properties of investments for their clients, plus give out dividends to those clients every month.
For a company to be a legitimate REIT, it must:
- Invest 75% or more of its total assets in real estate and U.S. treasuries for cash.
- Derive 75% or more of its gross income from interest on mortgages, real estate sales or rent payments.
- Pay at least 90%of its taxable income as shareholder dividends each fiscal year.
- Be a taxable corporation.
- Be managed by a board of trustees or directors.
- Have at least 100 shareholders or more after the first year of operations.
- Have no more than 50% of its shares owned by five or fewer people.
Do REITs pay investors dividends?
Yes, which is part of what makes them so desirable for investors. Both residential and diversified REITs pay monthly dividends to their shareholders and investors. This monthly income comes from rent and mortgage payments from the people who own the properties in the REIT.
Most REITs have an average rate of return of about 10.5%, similar to the rental rate of return landlords can expect in their first years of operation. Unlike landlords, however, REIT investors don’t need to spend much time and money maintaining or managing properties.
Note that REIT managers or companies collect a small commission from accrued mortgage and rent payments as the cost of their services. This is what pays the workers of real estate investment trusts, their managers and other professionals.
So, should you get involved with real estate investment trusts?
That depends on your career ambitions and prospects. REIT management is a complex and even potentially risky field for many.
If you get into REIT, you’ll often need to start at the bottom and work your way to the top, so your salary may not be exceptional in the first years of your career. However, the potential rewards of sticking with this career for several years could be pretty enticing.
You should consider getting into real estate investment trusts as a career path if:
- You are already interested in investing in real estate. Joining a REIT company could be the best way to learn about this unique investment field and how best to operate within it.
- You are interested in acquiring real estate and learning more about the real estate market.
- You have strong management skills.
- You are comfortable with a certain level of risk — not for yourself, of course, but for your clients.
What will you do in a REIT company?
That depends on your exact job title and responsibilities.
For most in the REIT industry, career paths begin by obtaining a position at a REIT company’s headquarters. You may start with essential maintenance or secretarial work, but gradually learn more about how a REIT company chooses its assets, communicates with its clients, and advertises its services to acquire new clients.
Real estate investment trusts career paths
There are multiple potential career paths you can pursue in any REIT industry. Here are just a few examples.
You might work as a property manager. Many REIT companies work with third-party property management companies. In a nutshell, property managers maintain rental properties, like apartment complexes or multiple homes throughout the same neighborhood.
If you work for a property management company, you might eventually be able to work for a REIT. Alternatively, if you work for a REIT, you might work as a property manager for that trust. In this case, the trust takes care of various rental properties, which it maintains and oversees on behalf of its clients.
You could also pursue a career as an asset manager. REIT asset managers decide which properties they should purchase and how much debt they need to take out in terms of loans or other financing arrangements to purchase those properties.
Asset managers also oversee all the aspects of owning and operating properties and ensure property expenses align with projections. This mid-level management job requires a lot of experience in real estate, investing and similar areas.
Development executives are chief executives for these funds. Thus, they have a lot of sway regarding what properties the REIT purchases, its profit and debt targets, and how the fund evolves.
Development executives identify opportunities to purchase new properties for the fund’s clients to improve financial prosperity for everyone involved.
This position pays well and is an excellent stepping stone to senior management positions in other real estate investment industry companies. However, expect to acquire lots of experience in the REIT arena before qualifying for this position.
Acquisition analysts are closer to the entry-level or middle manager position than development executives. That said, they are critical.
REIT acquisition analysts plan, implement, coordinate and identify properties that the fund they work for should acquire. For instance, they may find an attractive apartment complex that needs new investors, then recommend that the REIT company purchase it to diversify the portfolio further.
Because of this, acquisition analysts need skills and experience in the real estate investment industry. They need to know how to recognize and understand market trends, spot available properties and know what properties are worth.
It is also beneficial to have contacts in the real estate or investment industries before applying for these positions in a REIT. For instance, if you are friends with local realtors, you can get an early scoop about up-and-coming properties or new listings from your friends, allowing you to recommend properties to your REIT company or more quickly than other analysts.
Ultimately, you might enjoy working for a REIT company if you like investing, real estate, analysis and similar topics. If you’re successful in this field, you’ll also make a pretty fair salary.