Real estate has seen its fair share of ups and downs, however, averaging out the performance of the real estate market for the last couple of decades it has remained a great investment avenue for many investors. Influenced by interest rates and many other fiscal and monetary policies, the market is highly regulated and a haven for those with excess and liquid wealth. As many new investors analyze the prospect of real estate and other industries linked to it in 2021, many new students and recent graduates are questioning their future in the real estate market. Questions like “What are real estate investment trusts?” or “is real estate investment trusts a good career path?” or “what are the best paying jobs in real estate investment trusts?” are some of the major questions asked by students and graduates to help them decide whether or not to pursue this career path.
What are real estate investment trusts?
Before we let graduates know “is real estate investment trusts a good career path?”, it is important to know what these investment trusts are.
Real estate investment trusts, or in short REIT, are investment pools just like mutual funds. Real estate is expensive and considered to be a great long-term investment. As cities develop, land in the city and around become expensive due to the forces of demand and supply.
The prices soar high making it almost impossible for small-scale investors to invest in a piece of land to enjoy the returns associated with real estate. REITs are a pool of funds that collect money from investors and then invest in the land. The returns are then divided according to the portion of investment made by the investor.
So, how is REIT different from investing in real estate yourself? When compared to REIT and investing individually in real estate, one must look at their financial capacity. People with enough liquid funds should go for the latter and create their portfolio of real estate investments.
However, those that do not have sufficient funds and want a flavor of investing in real estate can do so by investing in real estate investment trusts. These are investment vehicles that copy the structure of mutual funds, however, instead of taking investments from individual investors to invest in stocks, REIT only deals in real estate.
Benefits of investing in REIT
You need to understand the magnitude of REIT to get your answer to “is real estate investment trusts a good career path?”. As all investment vehicles go, REIT also has its advantages and disadvantages. Before we go on to state the advantages, let’s briefly look at the major disadvantage associated with investing in REIT.
Any time of investment has its pros and cons. Just like any other investment or investment vehicle, there is a certain risk associated with it. Investments never guarantee a certain return and when you go to invest in a stock, there is a huge disclaimer that states the risks associated with investing money.
Let’s take for example the stock market. The stock market is a lucrative place to invest when it is going up or in technical terms when the market is bullish. However, that is not the case all the time. The stock market has listed companies and these companies can go south anytime even if there are strong indicators of positive growth. This is because there are two types of risk, systematic and unsystematic.
The unsystematic risk to a certain extent is controllable. It relates to the risk associated with a company however with proper management and best practices, the company can diversify the risk of investment and therefore unsystematic risk is also commonly referred to as diversifiable risk.
On the other hand, systematic risk is not associated with a company or corporation and can not be controlled or minimized. This can be the economy failing, high inflation, and so on. These types of risks are the one that concerns the investor and this is the type of risk that is mentioned in the tiny disclaimers found on investment account opening forms.
If you’re wondering which investment type typically carries the least risk, then REITs, treasury bonds, and corporate bonds are higher up on the list of which investment type typically carries the least risk.
Back to REIT, just as stocks pose a risk that can not be avoided or controlled, that type of risk is also present when investing in real estate investment trusts. Even if the real estate market is going up, a sudden recession can negatively impact REIT and therefore lead to a fall in the investments made in the sector.
Now that you’ve understood the disadvantage of investing in REIT, here are some of the benefits that make REIT a good option for many investors.
- As mentioned earlier, REIT is a great investment vehicle for individual and small investors who do not have sufficient funds to purchase real estate on their own.
- REIT provides a diversified portfolio. Instead of investors investing in a plot of land, REIT allows investors to pour money into many different plots of land or a portfolio of lands. This is great too because if the fund has an investment in New York and Texas, a small economic misadventure or setback in New York can be covered by the flourishing economy of Texas and so on. The risk is lower but it is still there.
- Liquidity is a huge winner when it comes to investing in REITs. You can not buy land one day and expect to sell it the other. However, by investing in REITs you can easily sell your shares and get your money back plus any profits you have made during your investment period.
Is real estate investment trusts a good career path: Types of REIT
Just like any other field, there are niches involved or subcategories or specializations. For example, in finance, you may find corporate finance is your calling or portfolio management is something that sparks your interest. Before you get your answer to “is real estate investment trusts a good career path?”, you need to know the different categories or types of REIT to help you make an informed decision.
There are three different types of REIT and they are equity, mortgage, and asset. We won’t look at the types of REIT in detail but just give a brief of what it is so that you can get an idea on “is real estate investment trusts a good career path?”.
Equity REIT
These are considered to be the simplest and widely form of REITs. Equity REIT involves owning the property, managing it, and looking after its upkeep. As time goes on, more properties are added to the portfolio. The main source of income from equity REITs is rental income. The rental income is collected before it can be divided among the investors according to their share of investment.
Now think about your question “is real estate investment trusts a good career path?” and equity REITs. If you were to get into this space, expect to be involved in everything related to the physical property. If you’re specializing in finance, you may get a job in managing the investment portfolio or the day-to-day expenses of the property or if you’re an interior designer then you may get an opportunity to work with equity REIT firms in remodeling homes and so on.
Mortgage REIT
This is an alternative to equity REIT as mortgage REIT looks into mortgages of properties. Unlike equity REIT that owns tangible properties, mortgage REIT is the opposite and there is no ownership of tangible assets or properties. The income from this is generated through interest. Mortgage REIT has many different job opportunities in the field of portfolio management, finance, analysis, and more.
Asset REIT
Asset REITs are similar to equity REIT but it holds assets in many different commercial properties ranging from retail shops to hospitals, schools and more. The assets depend on the investment company and their analysis report. This is a great option for those looking to diversify their investment in many different sectors.
Again, think about the different job responsibilities you may be asked before you consider “is real estate investment trusts a good career path for you?”.
Is real estate investment trusts a good career path?: Career opportunities
Finally, the question that you’ve been waiting for “is real estate investment trusts a good career path?” is here to be answered. You will get your answer once you understand the nature of jobs available in REIT.
Top paying jobs in REIT
Some of the best paying jobs in real estate investment trusts are in property management, development, asset management, and business research.
Property management deals with the day-to-day operations of the property. It is considered to be one of the most attractive jobs that can be found in REIT. So, if you are wondering about is real estate investment trusts a good career path, it’s a pretty lucrative option. There is a certain level of customer service involved in the role with a lot of managerial duties related to the management of the properties. REIT can be a great fit for finance and if you’re not into finance then property management (an important part of REIT) can be a great fit for you. Is real estate investment trusts a good career path? It depends on your career goals. Many individuals joining the field of property management in REIT end up being investors in their careers.
Development is the core of REIT especially when it comes to asset REITs and the involvement of many different projects. Construction and working with contractors in completing the different property projects (commercial or residential) is an important aspect of REIT. This can involve non-managerial tasks like looking after the finance to managerial roles such as project managers. There are plenty of opportunities available in the development side of things and it can get exciting too if the investment pool increases and more projects are added under the portfolio.
Business research is the backbone of REIT, especially in asset REITs and mortgage REITs. This is because you need to know what the next best opportunity is and grab it to make money for the stakeholders involved. The earnings of the company depend on this team as their information will ensure the right decisions that will push the value of the REIT upwards. This is a great department to work with and gaining experience in this field can help you climb up your career ladder as it opens many different doors like consultancy, business process re-engineering, and more.
The asset management or portfolio management is a department where people are in charge of monitoring, operating, and predicting their portfolios. As soon as an asset in a portfolio starts to show a downfall, it is the job of the portfolio manager or asset manager to replace that asset in the portfolio with a better asset. This results in a higher return for the investors and other stakeholders. Asset management is a pure finance-related field and if you’re into portfolio management then this is a great place to start.
As far as how many jobs are available in real estate investment trusts, the answer depends on the economic condition of the country as with any other job. And it also has a great impact on the question “is real estate investment trusts a good career path or not”. Because it is difficult to put your finger on a particular number because there are 52 states resulting in thousands of jobs in the United States. There are many different sectors of REIT with all demanding labor, however, if the economy starts to fall, then expect the real estate market to slow down. Construction and other related tasks to pending projects can be affected but jobs in portfolio management will still be available or jobs in managing properties will still be available as property needs to be managed irrespective of economic downturns.
Is real estate investment trusts a good career path for you? It all depends on the experience you want to gain and the field you want to pursue. You may enjoy horticulture hence REIT is not a good venue to start your career but a botanical garden might be. All the information provided Is the answer to the question “is real estate investment trusts a good career path” and it will help you in deciding on what you want to pursue and which department in REIT investment companies is the right fit for you.
