What is a REIT and how do they work?

A. Let’s start with the basics:

REITs stands for 'Real Estate Investment Trusts'.

These are essentially property companies that are listed on the stock market which you'll find pretty much most of them on TradingView.

So how do they work?

Step 1: An individual decides to invest in a REIT company.

Step 2: The money is then collected into a large pool (like all trusts).

Step 3: The pooled money is then invested into the property that the company either owns, operates or finances.

Step 4: Over time the company starts to make revenue and profit.

Step 5: The profits are then accounted and collected.

Step 6: The profits are then distributed in parts to the initial investors who
helped finance the company through a REIT.

Sounds great in theory…

But in reality, there is always a catch…

And that catch is timing.

The Big five SA Reits have lost over R100bn in value since 2018.

The BIG five REITs are:

1. Growthpoint
2. Redefine
3. Resilient
4. Vukile and
5. Hyprop.

Of course, this could be seen as an opportunity but there are several other factors we need to consider before deciding the best time to trade this type of asset.

A trick will be to overlay the five companies on a chart. See how they move and operate in conjunction to each other.

And then we can decide which are buys or sells.

Apples with apples.