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How to invest with a real estate investment trust (REIT)

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At a glance

  • A REIT is a firm that specialises in property investment to generate a return.
  • REITs can be held in ISAs, self-invested personal pensions (SIPPs) and Lifetime ISAs (LISAs), making them tax efficient.
  • REITs must meet specific criteria to qualify as a REIT.

What is a real estate investment trust (REIT)?

A REIT is a property investment firm that in the UK is listed on a stock exchange. The purpose of a REIT is to generate a profit from its property portfolios and generate a return for its shareholders or investors. REITs were introduced in the UK in 2007 and are exempt from corporation tax on profits generated from rental income and the income from the sale of rental properties.

How does a REIT work?

A REIT allows investors to pool their funds, which the REIT uses to invest in property to generate an income. Any profit that results is then shared with investors as dividend payments. Investors can hold these investments in an ISA, SIPP or LISA, making them very tax efficient.

There are more than 50 REITs listed on the London Stock Exchange with a value of around £54 billion.

 

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What are the best REITs in October 2024?

We have selected the best-performing REITs across Europe, UK Commercial, UK Healthcare and UK Residential based on the performance of a £1,000 investment over six months up to 1 October 2024. Please remember that past performance is no guide to the future. Investing should be considered as a long-term undertaking.

Investment property trust

Region or sector

Return generated over six months on £1,000

Tritax EuroBox PLC

Europe

£1,324.55

The PRS REIT plc

UK Residential

£1,322.22

Schroder REIT Ltd

UK Commercial

£1,283.82

AEW UK REIT plc

UK Commercial

£1,199.51

Schroder European REIT Ltd

Europe

£1,164.89

Source: Lipper/Moneyfacts Investment Life and Pensions Magazine
Note: the table above is ordered by the best performance in each sector up to 1 October 2024 over the previous six months.

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What are the different types of REITs?

The majority of REITs are equity based. This means that the REIT is listed on a stock exchange and invests in property to generate an income. Mortgage REITs provide finance to purchase property and generate income from the interest generated. There are also REITs that are listed on a stock exchange but do not trade and those that remain private and are not listed on a stock exchange.

Learn more

Learn more about financial advice and financial planning before you make any investment decisions.

How to qualify as a REIT

REITs need to meet specific criteria to qualify as a REIT, which includes distributing 90% of their net property rental income to investors.

To be eligible as a REIT in the UK, the firm must hold at least 75% of its gross assets in rentals and generate at least 75% of its profits from these. The REIT must own at least three properties and no individual property can be more than 40% of the fund’s total asset value.

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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

underground tube sign in london

At a glance

  • A REIT is a firm that specialises in property investment to generate a return.
  • REITs can be held in ISAs, self-invested personal pensions (SIPPs) and Lifetime ISAs (LISAs), making them tax efficient.
  • REITs must meet specific criteria to qualify as a REIT.

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Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.