Real Estate Investment Trusts (REITs) Explained for Beginners
Have you ever dreamed of owning a huge shopping centre or even an entire block of apartments, but don’t have £10 million lying around for a deposit? Don’t worry. Thanks to something called a REIT, you can invest in property without ever buying a building.
In this guide, we’ll explain what a REIT is, how it works, why it’s so popular, and how you can start investing in one today.
What Is a REIT?
REIT stands for Real Estate Investment Trust.
At its core, a REIT is simply a company that owns, manages, or finances income-producing real estate. Think shopping centres, apartment blocks, office buildings, or even hospitals.
When you buy shares in a REIT, you’re essentially becoming a part-owner of the real estate it holds. So instead of buying an entire property yourself, you can own a slice of the property market with just a few clicks.
Best of all, most REITs trade on public stock markets, meaning you can invest in them the same way you’d buy any other share.
How Does a REIT Work?
Let’s look at a simple example.
Imagine you invest in a REIT that owns a portfolio of commercial properties. Every month, those tenants pay rent. The REIT collects that income, covers its expenses, and then distributes most of the profit to shareholders, that’s you, in the form of dividends.
The more shares you own, the more dividend income you receive.
By law, most REITs must pay out at least 90% of their taxable income back to investors. This rule is what makes REITs so attractive to people who want a steady stream of passive income.
Why Invest in REITs?
REITs offer several major benefits for new and experienced investors alike.
1. Accessibility
You can invest in property without needing a huge deposit or a mortgage. With as little as £50 you can gain exposure to real estate markets that would otherwise be out of reach.
2. Diversification
Instead of putting all your money into one house or one company, a REIT lets you hold small stakes in many different buildings. If one tenant or property underperforms, the others help balance out your returns.
3. Regular Income
Because REITs are required to distribute most of their earnings, investors often enjoy consistent dividend payments, typically every quarter or in some cases, every month.
4. Liquidity
Unlike traditional property investments that can take months to sell, REIT shares can be bought or sold instantly during market hours, just like stocks.
5. Hands-Off Management
Owning property directly means dealing with tenants, maintenance, and legal issues. With a REIT, the company handles everything. You simply collect your dividends and watch your investment grow.
How to Invest in a REIT
Getting started with REITs is easy:
Open an investment account.
If you’re in the UK, a platform like Trading 212 has plenty of different REITs available to invest into on their platform.
If you are interested, they currently offer a free fractional share worth up to 100 EUR/GBP if you open an account through this link - click here.
(Capital at Risk, See Terms & Conditions)Search for REITs on your platform.
You can browse different types such commercial, residential, healthcare and retail buildings.Buy your shares.
Just like any stock, REITs are traded during market hours, so you can purchase or sell them instantly.
Tip for UK investors: Use a Stocks & Shares ISA to make your investments tax-free on dividends and capital gains.
The Bottom Line
REITs are one of the simplest and most effective ways to invest in real estate without the hassle of owning property directly.
They offer:
Regular dividend income
Easy diversification
High liquidity
Zero landlord responsibilities
If you’re looking for an accessible, low-stress way to start building wealth through real estate, REITs could be the perfect place to start.
This is NOT financial advice. This content is for educational and entertainment purposes only. Investing involves risk, and your capital is at risk. Past performance is not a guarantee of future results. The information in this blog was accurate at the time of posting.
