Why You Should Invest in a REIT

A real estate investment trust (REIT) is a company that owns and manages income producing real estate. REITs were created by an act of Congress in 1960 to enable large and small investors alike to enjoy the rental income from commercial property.

REIT is a quite popular way of investing in real estate in developed markets. It has enabled people with low income also to invest in real estate and take advantage of the huge investment opportunity.

REITs invest in most major property types with nearly two thirds of investment being in offices, apartments, shopping centers, regional malls, and industrial facilities. The rest is divided among hotels, self-storage facilities, health-care properties, and some specialty REITs that own anything from prisons, theatres, and golf courses to timberlands.

REITs are a good source of income. Most investors receive a part of the rent or interest payment by borrowers collected by REIT as their returns. Hence it provides regular income which is beneficial for people looking for additional sources of income as well as people who are not earning a regular salary. Additionally a liberal tax regime on REIT will further help investors receive a larger return on their investment.

REIT shares are bought and sold on a stock exchange. By contrast, buying and selling property directly involves higher expenses and requires a great deal of effort. Studies have shown that adding REITs to a diversified investment portfolio increases returns.

In Kenya, Stanlib Fahari I-Reit which is the first REIT in the country, marking a fundamental step towards efforts to deepen and develop the capital markets by facilitating diversification of products available in the market.

It will not only give local investors an opportunity to participate in the real estate sector in Kenya at an affordable price but also provide unit holders stable cash inflows from the income generating real estate properties.