A Real Estate Investment Trust (REIT) is a company that owns and operates income-producing real estate. It distributes most of its profits as dividends.
How REITs Work
| Feature | Description |
|---|
| Structure | Company that owns property |
| Requirement | Must distribute 90%+ of taxable income as dividends |
| Tax | REIT pays no corporation tax on rental income |
| Dividends | Paid to shareholders quarterly or semi-annually |
| Liquidity | Traded on stock exchanges |
Types of REITs
| Type | What They Own | Example |
|---|
| Residential | Apartment buildings, houses | PRS REIT |
| Commercial | Offices, retail space | British Land, Landsec |
| Industrial | Warehouses, logistics | Segro, Tritax Big Box |
| Healthcare | Hospitals, care homes | Assura, Primary Health Properties |
| Data centres | Servers, cloud infrastructure | Equinix |
| Mortgage REITs | Property loans | Different risk profile |
| Diversified | Mix of property types | LXI REIT |
Advantages
| Advantage | Why |
|---|
| Liquidity | Buy/sell like a stock |
| Diversification | Own many properties in one investment |
| Passive income | Regular dividends |
| No large capital needed | Buy from £50+ |
| Professional management | No landlord headaches |
| Tax efficient | No corporation tax within the REIT |
Disadvantages
| Disadvantage | Why |
|---|
| Property market correlation | Falls with property values |
| Interest rate sensitivity | Higher rates = lower REIT prices |
| Dividend not guaranteed | Can be cut |
| Fees (if fund) | Ongoing charges figure |
| Concentration risk | Some REITs are sector-specific |
How to Invest in REITs
| Method | How | Minimum |
|---|
| Direct REIT shares | Buy on stock exchange | £50-£100 |
| REIT ETF/IT | Fund holding many REITs | £50-£100 |
| Property fund | Open-ended fund | £500-£1,000 |
UK REIT Examples
| REIT | Sector | Yield |
|---|
| Segro | Industrial/logistics | 3-4% |
| British Land | Commercial | 5-6% |
| Landsec | Mixed commercial | 4-5% |
| Assura | Healthcare | 5-6% |
| Primary Health Properties | Healthcare | 5-6% |
| Tritax Big Box | Logistics | 4-5% |
REITs in an ISA
| Account | Tax on Dividends | Tax on Capital Gains |
|---|
| Stocks & Shares ISA | 0% | 0% |
| General account | Dividend tax (up to 39.35%) | CGT (10-20%) |
REITs are most tax-efficient inside an ISA.
REIT vs Direct Property
| Factor | REIT | Direct Property |
|---|
| Liquidity | High | Low |
| Diversification | Built-in | Single property |
| Management | Passive | Active |
| Cost | Low (broker fee) | High (SDLT, legal, maintenance) |
| Minimum investment | £50 | £50,000+ |
| Rental income | Dividend | Rent received |
Bottom Line
REITs offer property exposure without the hassle of direct ownership. They pay regular dividends and are traded on stock exchanges. Segro (industrial), Assura (healthcare), and British Land (commercial) are popular UK REITs. Invest inside an ISA for tax efficiency. Yields typically range from 3-6%.
This content is for educational purposes only. Not financial advice. Do your own research before investing.