So what are REITs?

REITs or sometimes called Property Investment Funds, are a new type of property fund that will allow people to invest in commercial property without the hassles of looking after bricks and mortar. These investments have been popular in the US and Australia, to enable private and institutional investors to participate in a tax efficient, diversified property asset that is traded on the stock market.

The commercial property market has seen considerable growth in the UK in the last decade. With the recent upheavals and global events affecting the volatility of the stock market, investing in property is increasingly attractive and provides a good diversification to an investment portfolio.

Property companies that become REITs will be exempt from paying corporation tax as long as at least 90 % of the profits are paid out to the shareholders. This means that dividends will be much higher than shares in a regular property firm. At present, money invested in property through a fund is effectively taxed twice - once when the property firm pays corporation tax and again when the investor pays income tax on dividends and capital gains on profits.

They have just been introduced in the UK and will be are due to be made available to the investing public in January 2007.

REITs are a welcome addition to the investment community as it allows the average person an opportunity to invest in commercial property. Ordinarily, the average man on the street will find that investment in commercial property such as shopping centres, office blocks and industrial units beyond their reach. 

How do you invest in a REIT?

What most people find really attractive about REITs is that they are free from capital gains tax or corporation tax characteristic of traditional property investment.  You will be able to buy a REIT the same way that you would buy a share in any company and you can do this through a stock broker or a bank.

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