February 11, 2023

Advantages And Disadvantages Of REIT Stocks

Advantages Of REIT Stocks

REIT stands for Real Estate Investment Trust. It is a business entity that invests directly in the residential estate by purchasing homes or mortgages. 

It might be partnerships, corporations, trusts, or associations. Similar to conventional equities, Real Estate Investment Trust shares can be bought and traded on a stock market.

A corporation must invest a minimum of 75% of its resources in real estate and generate at least 75% of its income from real estate-related operations in order to qualify as a Real Estate Investment Trust. Let’s find the advantages and disadvantages of Real Estate Investment Trust stocks.

4 Advantages Of REIT Stocks 

Purchasing REITs, especially ones that are publicly reported, has the following advantages:

1. Consistent dividends: Since REITs are required to pay out 90% of their net income to shareholders in the form of dividends, they frequently present a few of the best dividends on the stock market.

2. High returns: As was already mentioned, Real Estate Investment Trust returns have the ability to outperform equity indices, which is another reason why they constitute a great option for portfolio diversification.

3. Liquidity: Buying and selling publicly traded REITs is far easier than buying, managing, and trading commercial buildings, which can take a lot of time.

4. Less volatile: It tends to be less erratic than normal equities, partly because of their higher dividends. Other investment products can have their stomachs and bottoms safeguarded from REITs. Volatility, however, has an identical impact on all investments.

Benefits of REIT Stocks

5 Disadvantages Of REIT Stocks

1. Illiquidity (especially for private or non-REITs): In comparison to real estate, publicly traded REITs are easier to acquire and sell, albeit, as mentioned above, non-traded & private might present unique difficulties.

2. Excessive debt: The legal structure of REITs is another factor in their high debt. They typically are listed among the companies with the biggest debt loads.

Investors, however, have gotten accustomed to this structure because it frequently have long-term contracts that offer stable income flow.

3. Low investment and growth return: Since it pays out a significant amount of their earnings as dividends, they are unable to grow without raising capital through the sale of additional bonds and stock.

Investor interest in them could not always be high, particularly in times of recession or crisis.

1. Tax burden: Although Real Estate Investment Trust companies are exempt from paying taxes, Real Estate Investment Trust investors are still required to do so unless their investments are placed in tax-advantaged accounts.

(That is one reason REITs are an excellent choice for IRAs.)

2. Non-traded REITs are often expensive: Non-traded REITs might only be available to accredited investors who are willing to make an initial investment of $25,000 or more. Furthermore, non-traded REITs may levy higher fees than publically traded REITs.

Differences between REITs vs. REIT Mutual Funds

The differences between Real Estate Investment Trust  mutual funds and REITs in terms of dividends, taxes, investments, and income requirements are shown in the following table.


REIT Mutual Funds



  • Types of Investment

Diversified fund

Individual Company

  • Distributions

Distribution of dividends and gains to fund investors

90% of profits are paid out to shareholders

  • Tax Treatment

Taxes on earnings and dividends

Taxes on earnings and dividends

  • Investment and Income Requirements


75% of your assets are in cash and real estate, and you get 75% of your income from real estate.

Best REITs To Invest In Bangladesh 

A great way to increase wealth is through real estate investing. Commercial property is recognized as one of the highest income-producing investments.

If you have experience with office properties and are interested in learning how to advance in commercial real estate, this lesson will provide you with all the knowledge you need to move forward.

If a business doesn’t own the property, it will pay rent to the owner. Commercial real estate multi-year leases could be incorporated for more stable cash flow.

Additionally, this helps safeguard the owner in case rental rates drop. Visit www.reit.com.bd for more information or get in touch with Real Estate Investment Trust Ltd.

Are You Looking For Investor-Friendly Services For Bangladeshi Real Estate?

These attributes are provided by Real Estate Investment Trust Ltd.

  1. Package for crowd funding
  2. Pension Package
  3. Accommodations for one family
  4. Package of home appliances
  5. Family Package 
  6. P2P Lending Bundle


  • What is a REIT stock?

Ans: Real estate or related assets are owned by and, in most circumstances, operated by a Real Estate Investment Trust (REIT), a security that sells like a stock on major exchanges. 

A large number of REITs are listed with the SEC and traded publicly on a stock market. These are referred to as “publicly traded REITs.”

  • Are REITs a good investment?

Ans: Do REITs make wise investments? 

Investing in Real Estate Investment Trust is a great way to diversify a portfolio from outside traditional bonds and stocks because of its high dividend yields and long-term capital appreciation.

  • Is Real Estate Investment Trust high risk?

Ans: Due to the lack of public info that investors may use to investigate or estimate the value of non-traded REITs, they are riskier than publicly traded REITs. 

Due to their illiquidity, investors may not have immediate access to their money for a set amount of time, often up to seven years.

Bottom line

Investors benefit primarily from liquidity and diversification through Real Estate Investment Trust. Compared to other assets, investments in real estate have a historically favorable risk/return balance with lower volatility. 

But because real estate transactions generally take weeks or months to complete, the asset type is very illiquid. 

By having their assets offered on significant stock exchanges, REITs address this issue by facilitating easy buying and selling for investors.