Aspen Woolf, Real Estate Investment Trusts, (REITs)

Real Estate Investment Trusts (REITs)

These are property investment companies listed on the stock exchange. They own and manage property on behalf of shareholders.

They can invest in residential only, commercial only, or both. If you want to invest in a REIT you have to buy shares.

How do you make a return from investing in a REIT?

If you invest in a REIT and it does well, then you will receive a distribution of the profits.

The money you are paid from the taxexempt part of the REIT is paid net of basic rate tax as it’s treated as UK property income. Non-tax payers can therefore reclaim this and ISA investors receive gross payments.
Money paid from the non-exempt part is treated as the same as any UK dividend and is paid with a tax credit. As a REIT pays a smaller amount of corporation tax, you may get more profit as an investor. You can also hold shares in REITs in a tax-free ISA, which is a very efficient way to invest.

What are the risks of a REIT?

If you’re unlucky, the value of your investment may go down, which means you could be in danger of getting back less than you paid in.
The FCA has no authority over REITs so you can’t use the Financial Ombudsman Service if you have a problem. You also can’t claim any compensation from the Financial Services Compensation scheme should the company go bust.