REIT Financing

Equity REITs (eREIT)

An equity REIT, or eREIT, is a type of REIT that focuses on owning, managing, developing, and sometimes selling investment properties. It offers a hands-off way to invest in real estate since investors are not involved in the day-to-day management of the properties. eREITs make it possible for individuals to invest in real estate projects and properties they might not otherwise afford on their own.

The properties owned by an eREIT can be residential, commercial, or a mix of both. Examples include:

• Single- or multi-family homes

• Apartment complexes

• Commercial buildings

• Office spaces

• Storage facilities

• Shopping centers

Investors in eREITs earn money through dividends, which come from rental income or the appreciation of property values. Additionally, investors can benefit by selling their shares later at a higher price if the value of the properties increases.

Mortgage REITs (mREIT)

A mortgage REIT (mREIT) does not own physical properties. Instead, it deals with mortgages or mortgage-backed securities (MBS) — which are loans or collections of loans for residential or commercial properties. These mREITs are often traded on major stock exchanges like exchange-traded funds (ETFs) or mutual funds.

Mortgage REITs play a key role in the financial markets by providing the necessary funds (liquidity) for both residential and commercial mortgage lenders. Investors in mREITs earn money through dividend payouts, which come from the interest the mREIT earns on the mortgages or MBS it holds. While mREITs are known for offering high dividends, their performance is sensitive to changes in market interest rates.

Hybrid REITs

A hybrid REIT combines both mortgage and equity investments. This means it holds a mix of property assets—like commercial buildings or apartment complexes—while also investing in new or existing mortgages.

For investors unsure about which REIT to choose, a hybrid REIT offers a balanced approach. By including both types of investments, it can help minimize risk, regardless of how the market trends.