Real Estate Investment Trusts (REITs)
What is a Real Estate Investment Trust (REIT)?
Real Estate Investment Trusts or a REIT (pronounced "reet") offers customers a simplified method of investing in UK commercial property. The aim of REITs is to provide an opportunity for investors to invest in property in a tax efficient manner, while being highly liquid and operating under strong corporate governance.
The concept of a REIT is simple: it is a company which owns and operates income-producing real estate, this can be both commercial and residential. REITs are designed to provide security on the income from rented property assets in a tax efficient way, bringing returns from investing in a REIT into line with traditional property investments.
REITs have a tax efficient nature; because most of the company's taxable income is distributed to shareholders through dividends, the company is largely exempt from corporation tax. Therefore the double taxation (Corporation tax plus the tax on dividends) of ordinary property funds is removed.
Benefits of REITs
- Currently exempt from UK Corporation Tax but tax laws may change
- Liquidity - easily traded online on the London Stock Exchange.
- Access to property investment for minimal outlay - opportunities for growth, income and portfolio diversification.
- Access to UK commercial property, e.g. shopping centres and retail parks.
- Lower transaction costs than buying property directly (currently only 0.5% stamp duty on UK REITs compared to direct property which is up to 4%).
- There is no responsibility for property held in a REIT on the part of the investor.
How risky are REITs?
A REIT diversifies your investment over a number of different properties, so ironing out the sharp ups and downs that you may get form investing in one individual property therefore, your risk can be reduced.
Different REITs focus on different properties such as, industrial, commercial, residential and office accomodation, so it is important to consider which area best suits your needs and appetite for risk.
How much will it cost?
REITs are traded like shares at normal dealing commissions from as little as €15.00 per online trade. See full rates and charges.
Where can I find more information about REITs?
From the London Stock Exchange:
From REITA - Administered by British Property Federation:
What type of account do I need?
You can invest in REITS with out Trading Account.