Are Real-Estate Investment Trusts a Good Career Path?

Getting into real estate as a career path can seem like a hassle. However, helping families buy and sell properties is not the only way to join the real estate industry.

Real-Estate Investment Trusts (commonly known as ‘REIT’) have grown substantially over the years as a popular way for individuals to invest in commercial real estate without having to face the day-to-day real-estate hassles of property management. If you’re uncertain about the REIT career path, this article will give you the insight needed to make an informed decision. 

What Is a Real-Estate Investment Trust (REIT)? 

In simple terms, a Real-Estate Investment Trust (REIT) is a company that owns real estate and has its shares publicly traded on the stock market. REITs are modeled after mutual funds and acquire their capital from numerous investors. In other words, similar to owning shares of a company, a REIT allows multiple investors to share ownership of a property, or in most cases a portfolio of properties.

How Do REITs Work?

REITs typically focus on a particular category of commercial real estate. Diversified and specialty REITs, on the other hand, could include a variety of various property types in their portfolios, such as a REIT that owns both office and retail assets.

Numerous REITs are listed on significant stock exchanges, where investors can buy and sell them like stocks at any time during the trading day. These REITs are regarded as particularly liquid instruments and frequently trade in high volumes. This is convenient because REIT shares can be traded in a day, while actual real estate typically takes at least several months to be bought or sold.

Moreover, REITs have specific establishing requirements. These requirements can differ from state to state and country to country. Some U.S. requirements for REITs include the following: 

• A REIT should have at least one hundred investors and shareholders. 
• A REIT should have a board of directors and trustees experienced in managing the company. 
• A REIT must be a taxable entity. 
• A REIT cannot have a single person holding more than 50% of its shares. 
• A REIT must have 90% of its total taxable income paid as dividends to its shareholders. 
• No less than 75% of the REIT’s monetary funds must be invested in real estate, treasuries, or cash. 
• A minimum of 75% of the REIT’s gross income must be obtained from rent or sales (through real estate investments).

Types of REITs in the Industry

Equity REITs: Equity REITs generate income from the real estate that the REIT owns. A key characteristic of equity REITs is that their primary source of income comes from real estate rental revenues, not the resale value of the properties.

Mortgage REITs: Mortgage REITs provide capital to owners and operators of real estate either directly through mortgages and loans or indirectly through purchasing securities backed by mortgages. In simple terms, Mortgage REITs make money by collecting the interest payments on the loans they give out to various real estate projects. The difference between their interest on mortgage loans and the cost of funding these loans, (also known as net interest margin), is what drives their profits.

Hybrid REITs: Hybrid REITs as you can imagine, use a combination of both equity REIT and mortgage REIT investment strategies.

Commercial Real Estate Categories

REITs and commercial real estate as a whole can also be divided into categories and many subcategories.

Here are some of the main commercial real estate categories:

• Retail – REITs that focus on owning and managing retail properties, particularly in shopping areas and business districts. (Think retail stores and shopping malls).
• Multi-family – REITs that hold and operate residential rental properties. (Think apartment buildings, housing meant for families to live in).
• Healthcare – REITs that focus on owning and managing healthcare-related properties, such as hospitals and surgery centers. 
• Office – REITs that hold and operate office spaces.

How Do REITs Make Money? 

Real Estate Investment Trusts (REITs) purchase properties to generate rental income from the building occupants. Individual investors can purchase partial ownership or shares of the REITs, enabling the investors to profit financially from investing in several different properties and real estate securities in one portfolio. The dividends paid out by the REIT come from the profits they make from all the rental income generated from their real estate operations.

What to Expect From a REITs Career Path?

Here are a few expectations to keep in mind when considering a REIT career path.

1. Different types of REITs have different investment objectives. For example, equity REITs can significantly differ from mortgage REITs in their investment objectives. This will impact the type of expertise that you’ll need to learn to work at these REITs.
2. REITs can have a high barrier to entry when it comes to getting started in this field. Developing the experience and connections needed to kick-start a career in this field can be quite challenging.
3. Individuals in this career should also have an affinity with the real estate business and look to specialize in a particular real estate type or a particular real estate task in the real estate management process.

The Different Jobs on a REIT Team 

A REIT team will consist of many different roles that all help manage the large task of acquiring, managing, and selling real estate and real estate-related investments. These roles range from construction and development to property management and financial analysis.

See the below for some common roles in a REIT.

#1 Property Manager

Estimated Annual Salary: $35k - $90k

Some REITs will have in-house property managers while others will outsource property management duties to a third-party company. Property managers work with tenants and take care of overall day-to-day tasks needed to maintain the property.

#2 Asset Manager

Estimated Annual Salary: $50k - $128k

An asset manager is responsible for making higher-level property management decisions. Asset managers need to have a stronger financial background as they will constantly assess and manage a property’s operational costs relative to its revenue-generating capabilities.

#3 Acquisition Analyst

Estimated Annual Salary: $50k - $119k

An acquisition analyst is responsible for identifying profitable real estate purchasing opportunities. These analysts will need to have a good sense of the current markets and a strong financial modeling skill set. These analysts may also be involved with negotiating pricing and other real estate transaction deal terms.

#4 Marketing Coordinator

Estimated Annual Salary: $37k - $97k

A real estate marketing coordinator will be responsible for developing and executing marketing campaigns designed to help the company market new listings. This is particularly important for attracting quality tenants or potential property buyers.

#5 Construction and Development Manager

Estimated Annual Salary: $50k - $140k

Construction and development managers are involved with the REIT needs to develop or renovate a property. Property development can be quite risky and complex but is often tied to stronger financial returns.

Skills Needed for a Career in REITs 

There are some recommended essential skills that you should learn before jumping into a career in REITs. The importance of these skills will vary by role, but it will be good to have a general understanding of the below skills.

• Understanding financial statements and models
• Understanding the real estate landscape and market trends 
• Knowledge of the real estate due diligence process
• Negotiation and relationship building

Advantages and Disadvantages of Working For a REIT

Advantages:

• High-Income Potential: Certain roles within REITs and commercial real estate as a whole are largely linked to company performance. With this setup, high-performing REITs managing millions or billions of dollars may reward employees with strong payouts.
• Quantitative Focus: Those who enjoy working with data and quantitative figures will perform well when conducting data-backed market analysis. This type of skillset is often linked to roles that lead to higher-level management positions.
• Tangible Assets: Real estate is a tangible asset which means it is something that you can see, touch, and feel. This makes it easier for some to understand the real estate business relative to other industries built on complex and intangible revenue streams.

Disadvantages:

• Travel Requirements: Some roles in commercial real estate require quite a lot of travel. This could be enjoyable for some, but others may find it quite stressful and time-consuming.
• Long Deal Cycles: Commercial real estate transactions are complex and take several months or more to complete. Depending on your role, you may be stuck with the same set of properties for a long period of time.
• Market Fluctuations: The real estate market as a whole is strongly influenced by current market conditions. Weak economic conditions can lead to low-performing companies with weaker employee compensation.

Largest REIT Companies

Below is a list of some of the largest and most-popular REITs on the market. Consider exploring these companies when looking for more details on specific REIT roles and job opportunities.

• Annaly Capital Management 
• AGNC Investment Corp
• Prologis
• American Tower Corporation
• Crown Castle International

Are REITs a Good Career Path for You? 

Real Estate Investment Trusts can be an excellent career path for many willing to work in finance and real estate. With the right willingness and determination, employees can develop the finance and interpersonal skills needed to succeed in the industry.

Finance and accounting knowledge will be a great asset for entry-level analysts and managers looking to break into the industry. If you’re interested in learning these fundamental finance skills, we strongly recommend you check out our Complete Finance & Valuation Course alongside our Excel for Business & Finance Course!

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