Equity REITs consist of eight different sub-industries:
- Diversified REITs—comprised of companies that operate across at least two different property types, as exemplified by one company that operates in both the commercial and residential sectors
- Industrial REITs — comprised of companies that acquire, develop, own, lease and manage industrial warehouses, distribution centers and other properties
- Hotel and Resort REITs — comprised of companies that acquire, develop, own, lease and manage hotel and resort properties
- Office REITs — comprised of real estate firms that acquire, develop, own, lease and manage office locations
- Health Care REITs — comprised of hospitals, nursing homes, assisted living facilities and other healthcare properties
- Retail REITs — comprised of companies involved in the acquisition, development, ownership, leasing and management of retail locations
- Residential REITs — comprised of companies that acquire, develop, own, lease and manage residential properties, including multifamily homes, apartments, manufactured dwellings and student housing
- Specialized REITs — comprised of companies that acquire, develop, own, lease and manage real estate ventures that do not fit into one of the categories above
The benefits of investing in equity REITs include a more diversified investment portfolio and, in some cases, excellent tax savings opportunities. For instance, if a REIT distributes 90 percent or more of its taxable income as dividends, it isn’t taxed at the corporate level.
While the majority of income paid back to investors is certainly good for investment purposes, it comes with the disadvantage of reinvesting fewer profits into the company, which has the potential to impact future returns negatively.