Series 7

Packaged Securities - Real Estate Investment Trusts (REITS)

This discussion of packaged securities will end with a brief description of REITs - companies that buy, develop, manage and sell real estate assets. They allow participants to invest in a professionally-managed portfolio of properties.

What Are REITs?
REITs are similar to mutual funds, except the assets they buy are land and buildings rather than stocks and bonds. Also like mutual funds, REITs are pass-through entities which, in congruence with conduit theory, distribute the majority of income cash flows to investors without taxation at the corporate level.

The most tangible benefit of a REIT is liquidity. It is much easier to trade in shares of an investment company than to trade in actual bricks and mortar. Like closed-end funds, most REITs are traded on major exchanges.

The following articles on REITs will discuss the types of REITs, how to analyze them, their advantages, and how to pick the right REIT:


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