How to Go From Starting Out to CEO of a Real Estate Investment Trust
With the right goals you can go from where you are now, even if you are just starting out in real estate investing, to being CEO of your own real estate investment trust (REIT).
What is a Real Estate Investment Trust (REIT)?
A real estate investment trust is a corporation that raises funds from its shareholders to invest in real estate. A REIT is a bigger form of real estate investing compared to investing on your own because investors pool money into your REIT expecting a higher rate of return from the REIT. Investors expect a higher return from the REIT because the REIT can find the best deals in any geographic location which allows the REIT to return a higher return on investors’ money compared to other assets like stocks, bonds, and commodities.
How does your corporation qualify to be a REIT?
I will highlight below some of the biggest features of how to qualify as a REIT that are found on REIT.com where this linked site covers how to form a real estate investment trust.
- In the U.S. you need to have at least 100 investors.
- 5 investors added up together cannot hold more than 50 percent of the shares.
- No investor can own more than 9.8% of the shares in your REIT.
- Most (75%) of your REITs income must come from real estate cash flow and cash held in a bank (20%).
- No more than 5% can come from non real estate sources.
- Your REIT must distribute 90% of it’s earnings each year to shareholders.
When you follow the above rules, your corporation can qualify as a REIT.
What is the difference between a REIT and Turnkey properties?
There are no differences between managing a REIT and providing turnkey real estate investment services. Turnkey is a term that can be used by the REIT to market to investors and raise funds. The word turnkey alludes to having someone else manage property for investors so that investors do not worry about managing property or making repairs to property. REITs can use the term turnkey when they are marketing to investors to raise funds that are used to invest in real estate.
You still need to source real estate deals, close transactions, and manage the property if you are a REIT.
REITs can be publicly traded and raise billions of dollars to invest from the public and hedge funds.
How to make sure your REIT is successful
Many of the principles that you are taught at real estate investor associations (REIAs) and real estate investing courses prepare you for owning your own REIT.
To be successful as a REIT you need to become as big of investor as possible. You need to build a team, a network, raise cash, hustle, be professional, be willing to travel. These are all things that you already learn how to do at your REIA. Your goals are bigger because you will be doing it with more doors to make more cash flow.
Many of the team members that will help you form your REIT and take it public after you grow it’s revenue, shareholders, and real estate assets are found at the bottom of this linked page about lawyers, accounts, and investment bankers that are expert in REITs.
Market yourself online
Starting a REIT can be just like becoming a real estate investor in that you start local. There are benefits to starting local:
- Becoming expert in the area (for example knowing the profitability of different neighborhoods)
- Getting direct access to sellers through direct mail
- Building a local brand through repeat exposure to your market
Marketing online allows you to increase your reach to other markets when you are ready.
Marketing your REIT online allows you to build your network the fastest way possible because you can reach investors and team members in different markets when you are ready to expand.
Social media helps build connections. There are lots of professionals on LinkedIn that invest in real estate and that can help you source real estate deals.
You can do crowdfunding through your website. Crowdfunding is raising small amount of funds from a lot of people. For this strategy to work you need your website to get lots of traffic by ranking in Google for a lot of keywords. You can follow SEO to rank in Google, get investors for your REIT, and drive real estate leads to your website.
You can build your legal team in every jurisdiction that you run your REIT. Each jurisdiction has different laws. Focus on building your legal team in different markets when you are ready to expand.
How to take your REIT public
Going public means that the shares of your REIT will trade publicly like a stock on the stock market. Traditionally, you could raise the most amount of money to invest in real estate by going public. With your crowdfunding website, you could potentially raise the most amount of money through your own online platform.
The best advice on going public comes from investment bankers. Find investment bankers that specialize in REITs here.
With goal setting, the right marketing, innovative technology, and expert team you can go from where you are to being CEO of your own REIT.
What have you done to start a REIT?