Is Real Estate Investment Trusts a Good Career Path or Not?
Though often overlooked, REIT is a long-standing acronym on the stock exchange market. It stands for Real Estate Investment Trust, a special type of investment trust in the business of buying, owning, and selling commercial real estate, a.k.a real estate for business use. You’re probably wondering, is real estate investment trusts a good career path?
If you have a finance or real estate degree, you’ve probably stumbled upon REITs while researching exciting career opportunities. This guide will answer any questions you might have, starting with the most obvious: “Is a real estate investment trust a good career path or not?”
If you’re new to the stock exchange, here’s how investment trusts work.
As an investor, you might decide to buy shares from an investment trust. In return, the investment trust will make informed investments on your behalf, diversifying your portfolio. Investment trusts do this by pooling their investors’ money together and using it to make intelligent investments.
There are different types of investment trusts based on what kind of investments they make. These can be bonds, shares, or other assets. And, as you might have guessed, some investment trusts can take your money and invest it in real estate. These investment trusts are called – REITs.
The Securities and Exchange Commission (SEC) regulates real estate investment trusts in the US. Even though all REITs are registered as public companies, only some are publicly traded. REITs can enjoy incentives and tax benefits if they invest in government-run real estate.
What’s the appeal of real estate investment trusts? In addition to carefully curated investment options and diversified portfolios, investors who decide to buy shares from REITs get to invest in commercial real estate directly without having to manage properties. REITs do that for them.
Starting and managing a real estate investment trust is not a walk in the park, but it comes with significant financial, career, and lifestyle benefits that we will discuss later. Part of what makes REITs so complicated to manage is that they must meet specific requirements before they can start operating as public companies.
Most notably, the biggest chunk of REIT’s earnings goes to investors – between 90% and 100%. Whatever remains must be reinvested in property acquisition.
There are three types of real estate investment trusts – mortgage, equity, and hybrid:
Instead of purchasing, owning, and selling entire commercial properties, mortgage REITs buy only real estate mortgages. A minimum of 90% of all net earnings that these trusts make go to their investors. These types of real estate investment trusts make money for themselves from the difference in interest rates between the money they pay to borrow and use to fund their loans.
Unlike mortgage REITs, equity real estate investment trusts own and sell commercial real estate. Some of these trusts are in charge of property management, while some employ other management companies to oversee their properties. Another difference is that equity REITs usually give out the whole 100% of their net earnings to investors. They make money by selling real estate (from capital gains) or charging rent on their own commercial properties.
A special type of real estate investment trust is a hybrid REIT, which is in charge of property management for the real estate it owns but doesn’t do financing on its own. Instead, it outsources it through preferred equity or debt. Dividends issued by a hybrid real estate investment trust are a combination of dividends from income and capital gains. This REIT’s net earnings come from rental income.
Real estate investment trusts depend on the expertise and experience of people in several positions. If you’re looking for available jobs in REITs, you should know that working for these trusts implies research, acquisition, management, and development. All REITs roles require these skills, some more than others.
The most popular job positions in REITs are:
To perform well as an acquisition analyst, you must stay on top of current market trends and be informed enough to predict future developments. A combination of knowledge, experience, and instinct is needed to recognize opportunities for acquisition and development, navigate the purchasing process and negotiate prices.
In addition to having a say in property acquisition matters, asset managers are also responsible for overseeing financial operations at each property owned by the trust. An asset manager’s most important duty is managing property expenses so that they don’t surpass REIT’s planned budget. Compliance is another key responsibility of asset managers.
Playing the role of a development executive requires a profound understanding of how real estate is used and how it impacts the community. Development executives must stay in tune with the market’s pulse and be able to identify new opportunities. It is a highly strategic role with many tough decisions, primarily in the financial department.
In REITs, like elsewhere in real estate, property managers are tasked with running and supervising key operations in all or only some trust-owned properties. They manage people, expenses, and additional assets that often come with a property. Depending on the employer, it can be a more or less demanding role.
Aside from offering excellent investment opportunities that can make anyone with a knack for investing rich, real estate investment trusts are also generous employers. That doesn’t only imply high-paying jobs and other benefits that you’ll learn about later on.
REITs provide invaluable employee experiences to job seekers versed in finance and real estate, with plenty of room for professional and career growth. This is something important when considering is real estate investment trusts a good career path or not.
Another advantage of building a long-term career in real estate investment trusts is stability. Even now, with the global economy on the decline and a high level of inflation, most real estate markets are standing strong. When the economy goes down, real estate goes up. Not only are REITs mostly immune to economic challenges, but they also seem to thrive in the most unfavorable climates.
There’s no doubt about it – landing a job in a real estate investment trust is a good career opportunity. So, how do you start searching for one? After reading this guide and researching available options on the internet, you’ll have a better understanding of the educational and professional background required for most REIT roles. Of course, career planning starts in school.
If you’re still a student or have some time to hone your skills, you should know that many acclaimed universities in the US offer degrees in real estate. There are also numerous courses that you should take, from brokerage services and real estate accounting to commercial property management. That could significantly improve your chances of getting a REIT job.
According to the US News, the best REITs in 2022 are:
- Claros Mortgage Trust Inc. (CMTG)
Claros Mortgage Trust is a mortgage REIT focused primarily on senior loans and commercial properties in major US cities. At the moment, it is worth nearly $3 billion.
- Digital Realty Trust Inc. (DLR)
DLR is a world-known REIT with more than 4,000 customers. It provides space for massive data centers and stands shoulder-to-shoulder with the most popular tech giants.
- Rayonier Inc. (RYN)
Filling a unique market gap, Rayonier is a REIT that specializes in forest land. It owns and leases nearly 3 million acres of timberlands across the US.
- Sabra Health Care REIT Inc. (SBRA)
Your shares and job are safe with SBRA because this is one of the biggest providers of specialty facilities in healthcare. During 2022, SBRA’s gain went up 19%.
- Stag Industrial Inc. (STAG)
STAG is an industrial REIT that is currently worth around $6 billion. It owns and leases around 72.5 million square feet and 400 properties, primarily to manufacturers.
- Ventas Inc. (VTR)
This household name in healthcare provides more than 1,200 properties for senior housing, hospitals, medical research, and doctor’s offices. VTR is worth $20 billion.
- Vici Properties (VICI)
Vici is a hospitality and entertainment REIT with one of the most impressive commercial real estate portfolios in the world, which includes Caesars Palace and Hard Rock Cafe.
- Vornado Realty Trust (VNO)
Vornado owns, leases, and manages 23 million square feet of LEED-certified office buildings. Worth $5,7 billion, it is currently recovering from the “work from home” trend.
- Welltower Inc. (WELL)
Like Sabra and Ventas, this healthcare-focused REIT is a $37 billion trust that leases real estate to hospitals, clinics, and senior housing centers.
Real estate investment funds can own any kind of real estate that earns a profit. REITs differ in how they use these assets to generate revenue for their investors. Some make a profit by leasing or renting their properties, while others make money from capital gains after selling their real estate.
The most common types of properties that are owned and supervised by REITs are:
When it comes to choosing the most profitable industry for leasing or renting commercial property, hospitality is a top choice for REIT owners. The types of real estate involved in hospitality REITs range from luxury hotels to local cafes, providing excellent diversification options.
Retail REITs generate profit by leasing or renting commercial property to retailers. Depending on the type – whether it is a mortgage, equity, or hybrid investment trust – a REIT can be responsible for managing its property or not. In any case, investing in a retail REIT is usually low risk, high reward.
Warehouses, manufacturing buildings, plants, and cold storage units are just a few industrial properties always in high demand. Real estate investment funds can make a pretty profit by renting and selling these properties, as they often include a lot of square feet and special amenities.
Apartment communities and other rental properties rank highly on the list of commercial real estate owned and operated by successful REITs. That is because rental income from these commercial properties generates a significant ROI, not to mention a steady cash flow.
Healthcare is another widespread industry that needs a lot of space to accommodate its clients. The healthcare system spans an extensive range of facilities, from large hospitals to small dental offices. Many REITs own and manage these properties, leasing them to healthcare providers.
6. Office space
Even in the age of digital entrepreneurship, every respectful business has a brick-and-mortar office in a physical location. Office buildings are an excellent choice for many businesses, which makes them a profitable real estate asset. Savvy REIT managers take advantage of this great opportunity.
Some of the most significant benefits of having a job in a real estate investment trust are:
- Flexible work hours
As REITs pay their employees per contract, you can organize workflow around your peak productivity hours. That’s a great way to achieve a healthy work-life balance without compromising your earnings and chances for career development.
- Room for advancement
If you have a strong work ethic, REITs allow you to build your way up fairly quickly. You can start small, in an entry-level position, such as property manager, and take up more and more demanding tasks and real estate projects as you climb the professional hierarchy.
- Valuable experience
Standing at the crossroads of finance and real estate, REITs provide unique opportunities for professional growth. You will develop skills in both areas and gain valuable insight into both markets – learning how to invest in real estate is a precious skill in and of itself.
While contractual work is generally considered an advantage, some people might find it challenging to manage their workload. In addition, contractual work means you don’t get a monthly salary. Your income depends directly on your merit – it is calculated based on how much you contribute to the real estate investment trust and its shareholders.
If you need financial stability that comes with a fixed income, there might be better career options than this for you.
As mentioned before, running your own real estate investment trust might be more demanding than it seems. To reap the many benefits secured by leading trusts, REIT owners and managers must work hard to accumulate industry knowledge – including both financial and real estate skills.
Starting a REIT alone comes with several technical requirements that your trust must meet to be registered as a company. The many terms and conditions are set by the US Internal Revenue Code (IRC) and include (but are not limited to) the following list of requirements:
- REIT’s management body must consist of a board of directors.
- There must be at least five or more shareholders for each 50%.
- There must be at least 100 investors at the end of the first year.
- REIT must give at least 90% of taxable profit to the investors.
- At least 75% of REIT’s total profits must come from real estate.
- At least 75% of REIT’s profits must be reinvested in real estate.
The average salary of a REIT employee can be anywhere between $45,000 and $100,000 per year, depending on whether you have an entry-level role or executive position:
- Acquisition analysts in REITs make between $53,000 and $70,000 per year.
- Asset managers in REITs make from $50,000 to $90,000 in senior positions.
- Development executives in REITs make the most – around $100,000 per year.
- Property managers in REITs make between $45,000 – $60,000 per year.
As we’ve mentioned, you don’t get a fixed income as a real estate investment trust employee. Instead, you work per contract for a base salary and top that with merit-based cash or equity incentive compensation, while executives receive perquisites or fringe benefits.
Real estate investment trusts have been around for a long while, since the 1960s. They’ve stayed stable and reliable during all that time, overcoming more than a few economic crises. They are an unchanging constant on the stock exchange market. That alone makes REITs a great career path.
However, in addition to job stability, REITs offer many opportunities for growth and lateral movement up the company ladder. One of the most attractive benefits of building a career in REITs is the priceless real estate investment experience, which you’ll be able to monetize if you decide to leave REITs.
Of course, this doesn’t answer the question of whether working in a REIT is a suitable option for you. If you’re interested in finance or real estate, have an educational background to support that interest, and are looking for flexible hours and a good work-life balance, this should be a good fit.