Investing in real estate can be an exciting strategy, being both lucrative and satisfying at the same time. Buying a property usually requires that you have a portion of the total cost up front while you will be paying of the balance, plus interest over time. Traditional mortgages usually requires a 20% to 25% down payment. Once you have acquired the property you will then have to ensure you get a tenant that rents the property. You will also have to ensure that the property is maintained and rent is paid by the tenant.
If you don’t have the down payment to secure a mortgage or don’t want to deal with tenants, collecting rent and maintenance. There is another way of owning real estate through a real estate investment trust.
What Is a Real Estate Investment Trust?
A Real Estate investment trust(REIT) allows individual investors to buy shares in commercial real estate portfolios that receive income from a variety of properties. Properties included in a REIT portfolio may include apartment complexes, data centers, health care facilities, hotels, infrastructure—in the form of fiber cables, cell towers, and energy pipelines—office buildings, retail centers, self-storage, timberland, and warehouses.
Realty Income Corporation is an example of such a real estate investment trust (REIT). The Company is engaged in in-house acquisition, portfolio management, asset management, credit research, real estate research, legal, finance and accounting, information technology and capital markets capabilities. As of December 31, 2016, the Company owned a diversified portfolio of 4,944 properties located in 49 states and Puerto Rico, with over 83.0 million square feet of leasable space leased to 248 different commercial tenants doing business in 47 separate industries. As of December 31, 2016, of the 4,944 properties in the portfolio, 4,920, or 99.5%, were single-tenant properties, and the remaining were multi-tenant properties. As of December 31, 2016, of the 4,920 single-tenant properties, 4,836 were leased with a weighted average remaining lease term (excluding rights to extend a lease at the option of the tenant) of approximately 9.8 years.
Realty Income Corporation trades on the New York Stock Exchange under the ticker O. The company purchases commercial real estate leased to tenants under long-term net lease agreements, generally 10-20 years. The lease payments generated each month are used to support predictable monthly dividend payments to shareholders.
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