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REITs - Types and Asset Portfolio


In the previous article we introduced ourselves to REITs and the possibility of using them to diversify our investment portfolio. In this article, we will examine the different types of REITs and the portfolio of an REIT.



Types of REITs –





1. Equity REITs - This is the most common form of REIT. The trust owns income producing real estate and primarily earn revenue through rental income
2. Mortgage REITs – These are also known as mREITs. These trusts lend money to real estate owners and operators. The lending can be either directly – through loans and mortgages or indirectly – through mortgage backed securities (MBS). 

mREITs primarily earn from the net interest margin (NIM) – the spread between the interest they earn through these mortgages and the cost of lending theses funds.

They are potentially sensitive to changes in interest rates due to the mortgage-centric nature of these REITs.

3. Hybrid REITs – As the name suggests, Hybrid REITs are a combination of Equity and Mortgage REITs, that is, hold both – physical rental property and mortgage loans in their portfolios. Depending on the investing focus, the REIT may weigh the portfolio to more towards equity or mortgage.

4. Publicly Traded REITs – These REITs publicly list their shares on a recognized stock exchange, where they are bought and sold by individual investors. They are regulated by the Securities and Exchange Board of India (SEBI).

Now you have a better insight into the types of REITs and the real estate assets they own. The next article will explain what qualifies as an REIT and its structure.

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