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What are the pros and cons of REITs?



Our response:

We can’t provide advice, only general information. Real estate investment trusts (REITs) are generally riskier investments, so understand all the risks before you consider this type of investment – use this Risk by asset class infographic to see how REITs compare to other investments.

REITs are publicly traded companies (on stock exchanges) that own or operate income-producing real estate. REITs are a type of income trust, which allows companies to pay out their earnings in dividends directly to investors on a regular basis. In exchange, the investors pay the taxes on the earnings, not the trust. This tax treatment means income trusts may offer higher yields to investors. REITs are subject to the same risks as any real estate investment, including quality of the properties and changes in the real estate market. Income trusts can stop paying distributions to investors at any time. This may make the income trust less attractive to investors, which could lower the share value or make it hard to sell the investment.

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