Real Estate Investment Trusts: Are They a Good Career Path?
Have you always had your eye on getting into the real estate industry? Maybe you aren’t keen on working as a real estate agent but know you want to be involved in the industry somehow.
You may be a great fit for real estate investment trusts if you have a good mix of real estate and finance expertise. But you might ask yourself, “Is real estate investment trusts a good career path?”
They can be for the right people. The key is understanding the personalities and skills that work best for working in the real estate investment trust industry and the pros and cons.
All jobs have good and bad sides that you should understand before starting a new position, including those in the real estate industry.
What Are Real Estate Investment Trusts?
Real estate investment trusts, known as REITs, are publicly traded companies operating as trusts. REITs own, manage, and sell properties, and investors can purchase company shares to get a diversified real estate portfolio without owning real estate properties themselves.
The Securities and Exchange Commission regulates publicly traded REITs—the shares trade on the stock exchange, like regular stocks.
Like most real estate investments, there are many options for real estate investment trusts and many opportunities to work in the real estate investment trust industry.
Understanding the different types of REITs and positions available in each can help you choose the perfect career.
Mortgage REITs invest or purchase mortgage debt on commercial properties. The real estate company acts like a lender rather than a landlord. Mortgage REITs may finance real estate investors directly, or they may purchase already funded mortgages with predetermined interest rates.
Investors earn interest from the borrowers monthly, plus a return of the principal borrowed through regular monthly payments. Like any investment, there is a risk of default and total loss, but a good REIT diversifies its funds through multiple investment opportunities.
Equity REITs own income-producing real estate like hospitals, shopping malls, and office buildings. The rental income is often the primary source of income for REITs. The tenants of the rental properties pay rent monthly, providing income for the REIT.
Equity REITs also earn profits from the property’s capital gains which investors earn when the REIT sells properties. Most REITs are long-term investments because real estate companies hold onto commercial real estate long-term, but some may be shorter or even fix and flips.
Hybrid REITs do a little bit of both equity and mortgage REITs. They invest in real estate for regular income and mortgage loans to offset the risk of equity investments. Think of it like diversifying the portfolio. There’s reduced risk when you don’t put all your eggs in one basket. This option works best when mortgage rates are high, as it can offset any risk of vacancies or non-paying tenants in equity REITs.
The nice thing about hybrid REITs is you get the best of both worlds within one investment. You don’t have to worry about managing multiple investments to diversify your risk and avoid a total loss.
What REITs own
REITs own many types of real estate, but they often purchase commercial real estate properties, usually those that are income-producing. Some REITs may diversify and include properties to hold for long-term capital gains. Examples of commercial properties REITs own include:
- Apartment buildings
- Office buildings
- Shopping malls
- Medical buildings
- Shopping centers
- Individual retail properties
What, Exactly, Does a REIT Company Do?
A REIT company is like a fund manager for mutual funds. REIT companies buy real estate properties and manage and sell them. They may keep multiple properties long-term, acting as property managers, collecting rent, and maintaining them. Some real estate investment trust companies purchase properties to immediately sell them for a profit, and others diversify by including mortgage loans in their REITs.
Only Certain Companies Qualify as REITs
There are strict requirements for companies to qualify as real estate investment trusts. The most significant factor is that most of the company’s assets and income are related to real estate. This means the company must invest most of its capital in the real estate industry, whether income-producing properties, short-term purchases, or mortgage debt.
In addition, a real estate investment trust must share at least 90% of its taxable income with shareholders. Real estate investment trusts usually do this in the form of annual dividends.
In addition, real estate investment trusts must follow these guidelines:
- Must be a taxable corporation
- Need to maintain fully transferable shares
- No more than five individuals may hold over 50 percent of the company’s shares
- At least 75% of the income must come from the real estate industry
- At least 75% of the real estate investment trust’s assets must be invested in real estate
- Must have a board of directors
What Makes REIT A Good Career?
If you’ve focused on working in the real estate business but don’t know where to start, working for a REIT can be a good career path because you have many job opportunities. If you’re new to the real estate industry, you can start in an administrative position and work your way up the ladder as you master the art of real estate investing.
What you do next depends on the skills you acquire; whether you want to work as an asset manager, property manager, analyst, or portfolio manager, the opportunities are plentiful.
What Personalities Are Typically Drawn to This Career Path?
Anyone interested in the real estate market, investments, and property management would benefit from working in a REIT. They work best for people who love to talk, understand risk, and are good at decision-making. You must be a go-getter and be able to adapt to fast-moving situations.
Skills You Will Need To Be Successful
Each job within the REIT industry requires different skills, but in general, here’s what you need to make real estate investment trusts a good career path:
- Excellent attention to detail
- Superior communication skills
- Excellent management skills
- Comfortable with risk and able to assess it
- Knowledge or the ability to learn about the real estate investments
What Kinds of Jobs Exist at Real Estate Investment Trusts?
A real estate investment trust career path could start as a maintenance worker, secretary, or assistant. This ground-floor opportunity is a great way to navigate the real estate career path.
In lower-level positions, you can get a bird’s eye view of how REITs work and what position may interest you the most. Some positions require degrees, but most require extensive knowledge of real estate investing and how real estate investment trusts work.
To work as an asset manager, you need extensive experience in the real estate market. You must be able to identify which properties to purchase and sell. You must also be able to determine how much debt you must acquire to purchase properties and evaluate the expenses incurred when operating properties.
Asset managers oversee the properties, ensure all expenses align with the predictions, and make adjustments as necessary. There are many levels of asset managers, so you may start at the mid-manager level, but to work your way up to the executive level, you’ll need extensive real estate investment experience, including as a property manager, so you understand not only how to purchase, but also to manage properties.
You can work as a property manager for real estate investment trusts in multiple ways. Initially, you may work at a property management company that manages multiple properties for REITs. As you gain experience, you may get a job directly with a real estate investment trust as a property manager.
Not all property managers work directly for a REIT, some real estate investment trust companies contract out their property management needs, but if you have a history of managing properties, you may have an easier time getting hired by real estate investment trusts.
If you’re looking for a good career path in REITs to climb the ladder, working as a development executive is the best way to start.
Development executives make robust decisions regarding real estate projects, pay close attention to market fluctuations, set profit and debt goals, and focus on the big picture to ensure it’s in the best interest of everyone and will pay investors dividends.
Acquisition analysts are a step below development executives but also are a good career path for anyone interested in REITs.
Analysts evaluate potential investment opportunities and recommend them (or dissuade them) depending on their findings. Analysts may locate great residential rental properties, commercial buildings, and other real estate properties that would fit well in the existing investment fund.
Advantages of Working for a REIT
As you determine the answer to ‘Is real estate investment trusts a good career path?’ consider the advantages of this lucrative career path.
- You can learn much about the real estate market without risking your money. Starting at the bottom, you can learn about actual real estate without owning it yourself and may eventually become a real estate investor someday.
- You can put your analyst skills to work while making the most of investing in commercial real estate with other people’s money. A real estate analyst helps executives make important decisions, so it’s a critical job.
- You may not need a degree, although as you climb the ladder, it will help, especially if you want to get into financial analysis or prepare financial statements for the REIT.
- You can move around to many positions while staying with the same company, or even changing REITs, climbing the ladder as new opportunities become available.
Disadvantages of Working for a REIT
As with any career, it’s important to see the downsides when deciding if real estate investment trusts are a good career path.
- The real estate market trends can fluctuate significantly, making your job volatile and stressful. You must be able to handle high-stress situations because you’re dealing with other people’s money.
- REIT professionals must understand and stay up-to-date on the latest real estate and financial market regulations. Not only must you be interested in the latest updates, but you must have continuing education to remain effective in your position.
- You may have to start at the bottom and work your way up the ladder. You probably won’t start with REIT asset managers positions, for example, unless you already have extensive experience as a real estate agent or in other real estate positions.
- A REIT career path can be overwhelming, especially if you don’t have experience in the financial markets. Real estate investment trusts have many moving pieces, including investors, real estate owners, property managers, and many others invested in the process.
Final Thoughts—Is Real Estate Investment Trusts a Good Career Path?
As you explore your options in the real estate industry, you may discover real estate investment trusts as an option. You may be a perfect fit if you’re ready to work many angles of real estate transactions, have analytical skills, and love a good challenge.
Whether you’ve invested in real estate investment trusts yourself or want to get your feet wet, working in the industry before investing your money can be the perfect opportunity.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.