Real Estate investment trust(REITs) in the recent years have emerged as a popular and accessible investment option in the real estate market. They provide investors with an opportunity to participate in the real estate sector without the need to directly own property. In this blog we will explore the concept of (REITs), their benefits and the impact on the real estate market.

What are Real Estate Investment trusts

It is a financial vehicle that pools funds from multiple investors to invest in income generating  real estate assets. REITs are publicly traded on the stock exchange and in investing in REITs offers a unique way to diversify your portfolio of real estate properties including residential commercial and industrial assets.

Types of REITs in Kenya

• Equity REITs: These REITs invest in and own income generating real estate properties generating revenue through rent and capital appreciation.
• Mortgage REITs: These REITs primarily lend money to the real estate  developers or provide mortgage financing for properties, earning income from the interest on the loans.

Benefits of Real Estate Investment Trusts

• Diversification: It allows investors to diversify their real estate holdings across multiple properties and asset classes, reducing risk associated with investing in a single property.
• Liquidity: Unlike direct real estate ownership, REITs are traded on the stock exchange. Providing investors with greater liquidity as they can easily buy and sell shares
• Professional management: Under management of real estate professionals, therefore alleviating the need for investors to handle property management tasks.
• Passive income: It distributes a significant portion of the investors income as dividends providing a steady stream in passive income
• Low Entry barrier: They offer a lower entry barrier for real estate investment compared to purchasing an entire property, making them accessible to a wider range of investors.

Factors to Consider Before Investing in REITs

1. Market Research: Conduct thorough research on the REIT’s track record, asset portfolio, and financial performance to gauge its potential for sustainable returns.
2. Risk Assessment: Like any investment, REITs carry inherent risks. Assess factors such as interest rate fluctuations, economic conditions, and vacancy rates to make informed decisions.
3. Tax Implications: Understand the tax treatment of REIT dividends and any potential implications on your overall tax liability.

Conclusion

Real Estate Investment Trusts (REITs) have revolutionized the real estate investment landscape in Kenya. It  offers a more accessible and diversified approach to investing in the lucrative property market. REITs provide an opportunity for both individual and institutional investors to participate in the growth of the real estate sector while enjoying steady passive income and liquidity.