UNDSERSTANDING REAL ESTATE INVESTMENT TRUSTS (REITs)?

What are REITs? In their most basic form, they are companies that own property on behalf of shareholders/investors. Strangely enough, REITs were born out of an excise tax on cigars in 1960. President Eisenhower signed off some additions to a federal law, which paved the way for the creation of the industry that now manages real estate investments. REITs are attractive to investors because they offer a diversified approach to property ownership, without the REIT shareholder actually owning a specific property themselves. However, REITs are quite different from other investments in that they are subject to some strict rules. REITs try to simplify that. By bundling properties together and packaging them into a single investment, REITs allow investors access to the real estate market that can be more complicated to take on alone. There are unique tax-related issues and liquidity elements that make REITs different than buying an individual house or building, but their purpose is to simplify that type of investment.