Chapter 5: Real Estate Investment Trusts

Are you wondering if investing in real estate is right for you? If you own a house, you may be thinking that you’re already investing in real estate. However, a house is a consumption good, not an investment, especially when you finance it with a mortgage loan. Instead of generating current income, it requires regular mortgage interest, real estate taxes, insurance payments, and maintenance costs. For many intelligent investors throughout history, real estate has been an excellent way to increase wealth and build fortunes because it fulfills a basic need. In fact, American industrialist John D. Rockefeller once said, “The major fortunes in America have been made in land.” When you invest in real estate, you’re buying physical land or property. That is, you’re investing in a real, tangible asset. Real estate is generally considered as an alternative investment to more traditional asset classes such as stocks, bonds, and cash.