TO understand what real estate investment trusts (Reits) are all about, the first order of business is to distinguish them from real estate.
Investing in real estate entails purchasing immovable property such as office buildings or a residential park. To be a player in this industry, one must have the capacity to purchase immovable property outright or have access to mortgage finance, both of which are difficult.
Return on investment is acquired through lease agreements either through increasing rentals or negotiating extended leases.
While this guarantees a steady and consistent income, it does not, however, solve the liquidity problem that inevitably comes with owning and managing real estate. It is notoriously difficult for real estate investors to achieve enough liquidity to cater for day-to-day expenses.
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