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Real estate investment trusts (“REIT's”) allow individuals to invest in large-scale, income-producing real estate. A REIT is a company that owns and typically operates income-producing real estate or related assets.​  REIT's and real estate platforms are two ways to invest in real estate without owning physical property.  REIT's are securities you purchase through a brokerage account, similar to investing in stocks.

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REIT's allow you to invest in real estate without the physical real estate. Often compared to mutual funds, they're companies that own commercial real estate such as office buildings, retail spaces, apartments and hotels. REIT's tend to pay high dividends, making them a common retirement investment. Investors who don’t need or want regular income can automatically reinvest those dividends to grow their investment further.

REIT's could be a good investment.  However, they can also be varied and complex. For example, some trade on an exchange like a stock, while others don’t. The type of REIT you purchase can be a big factor in the amount of risk you’re taking on, as non-traded REIT's aren’t easily sold and might be hard to value. New investors should generally stick to publicly traded REIT's.

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These may include office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans. Unlike other real estate companies, a REIT does not develop real estate properties to resell them. Instead, a REIT buys and develops properties primarily to operate them as part of its own investment portfolio.

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Non-traded REIT's are typically sold by a broker or financial adviser. Non-traded REIT's generally have high up-front fees. Sales commissions and upfront offering fees usually total approximately 9 to 10 percent of the investment. These costs lower the value of the investment by a significant amount.

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Before investing in REIT's, you should verify the registration of both publicly traded and non-traded REIT's through the SEC’s EDGAR system. You can also use EDGAR to review a REIT’s annual and quarterly reports as well.

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By Jason Torrents