- A REIT lets you invest in a pool of properties without buying a building yourself.
- Returns can come from rent income and value growth, but they are not guaranteed.
- Check the regulator, the fees, the properties and how easily you can sell.
The Short Answer
A real estate investment trust, or REIT, pools money from many investors to own or finance properties such as offices, shops, apartments or warehouses. You buy a share or unit in the trust instead of buying a building yourself. REITs can offer a way to invest in property with smaller amounts and easier selling than owning a whole building, but returns are not guaranteed and values can fall. Rules differ by country. This is general information, not investment advice.
How REITs Work
The trust collects rent and other income from its properties, pays running costs and usually distributes a large part of the profit to investors. The value of your units can rise or fall depending on property values, interest rates and how the trust is managed.
REITs vs Owning Property Directly
| Factor | REIT | Direct ownership |
|---|---|---|
| Starting amount | Often small | Often large |
| Management | Handled by professionals | You or a manager |
| Selling | May be easier, depending on the market | Usually slow |
| Control | Little control over which properties are bought | Full control |
| Risks | Market price swings, fees and manager quality | Vacancy, repairs, title and tenant risks |
What to Check Before You Invest
Regulation. Confirm that the trust and manager are approved by your securities regulator.
The properties. Look at their location, type, occupancy and condition.
Fees. Management and other fees reduce your return.
Income history. Check how steady the payouts have been, and remember that past results do not promise future ones.
Debt. High borrowing raises risk.
Selling. Find out how and when you can sell your units.
Be Careful of Scams
Some schemes call themselves property funds but are not regulated or do not own real property. Read our guide on spotting investment scams before you invest.
Where REITs Fit in Your Plan
Invest only after you have an emergency fund and have cleared expensive debt, and spread your money across different types of investment, as explained in our guide to index funds and ETFs. For direct ownership, compare with our guides on evaluating a rental property and real estate investing for beginners in Nigeria.
Action Checklist
- Decide how long you can leave the money invested
- Confirm the trust and manager are regulated
- Review the properties, fees, debt and payout history
- Check how and when you can sell
- Spread your money across several investments
- Avoid unregulated or guaranteed-return schemes
- Review your holdings once or twice a year
