Reits: Flavour of the month?

livemint.com:

investing in real estate? Here’s the story from a book we read a while ago… Otis Booth, an American billionaire newspaper executive and investor, came to Charlie Munger when he was studying law, asking Charlie to handle the sale of some real estate assets. Considering the location that Booth was looking to part with, Munger immediately advised him to keep the property and develop it by building his own apartments. To this, Booth reverted… Charlie, if this is such a good idea, and you’re so sure it will work, why don’t you put up some of the money and join me. I won’t do it without you. What followed was Munger and Booth joining forces and investing around $100,000 to build that property.

From parting with a huge investment to buy that property, holding it through recessions, to selling it at an incredible 400% profit, this is one of Munger’s greatest success stories in real estate investing. While we can go on and on about the perks and benefits of investing in real estate, there are some challenges like high investment. There’s also the constraint about diversification… most people find it tough to even buy a single property.

Now imagine the capital required to diversify your real estate investments through a variety of real estate holdings like office spaces, retail shops, and industrial buildings. This is where Reits come in! In simple words, a real estate investment trust (Reit) is a company, that raises funds from investors and invests the funds in a portfolio of real estate assets. It also controls and manages the real estate portfolio.