Skip to main content

What REITactical Is and How Real Estate Investment Trusts Work

By Constance Obi · Culture & Recreation Writer

REITactical is an educational platform about real estate investment trusts

REITactical is a free online resource that teaches you how real estate investment trusts (REITs) work, what they cost, and how they fit into an investment strategy. It does not sell investments, manage money, or give personalized financial advice. Instead, it walks through the mechanics of REIT investing in plain language—what a REIT actually is, how dividends work, what fees you might encounter, and the tax implications you should understand before you invest.

The platform is built for people who have heard about REITs but want to understand them before talking to a financial advisor or broker. It covers both publicly traded REITs (the kind you can buy through a regular brokerage account) and non-traded REITs (which work differently and carry different costs). The goal is to give you enough information to ask the right questions when you speak with someone who can actually manage your money.

Key Takeaways

  • REITactical explains what REITs are, how they generate income through rent and property sales, and why they are structured as trusts rather than regular corporations.
  • The platform breaks down the difference between publicly traded REITs (liquid, lower fees, transparent pricing) and non-traded REITs (illiquid, higher fees, less transparent).
  • You will learn what expense ratios, dividend yields, and leverage mean in the context of REIT investing, and how each affects your actual returns.
  • REITactical covers tax treatment of REIT dividends and how REITs fit into retirement accounts versus taxable accounts.

How REITs generate income and why the structure matters

A REIT is a company that owns income-producing real estate—apartment buildings, office parks, shopping centers, warehouses, hotels, or medical facilities. Instead of operating like a normal corporation, a REIT is required by law to distribute at least 90 percent of its taxable income to shareholders as dividends. That legal requirement is why REITs exist: they pass income directly to investors rather than keeping it in the company.

REITs make money in two ways. First, they collect rent from tenants and pass most of it to shareholders as dividends. Second, they buy and sell properties, and any profit from those sales also flows to shareholders. The structure means you are essentially owning a piece of a real estate portfolio without having to buy, manage, or maintain individual properties yourself. REITactical walks through how this income flows, what happens when a property is sold, and why the dividend you receive is taxed differently than dividends from regular stocks.

The difference between publicly traded and non-traded REITs

Publicly traded REITs trade on stock exchanges like the New York Stock Exchange. You can buy and sell them through any brokerage account, the price changes throughout the day based on supply and demand, and you can see what other investors paid for the same REIT. Expense ratios (the annual fee the REIT charges to operate) are typically between 0.2 and 1 percent of your investment. You can move your money in or out quickly.

Non-traded REITs do not trade on an exchange. They are sold through financial advisors or brokers, often with upfront fees (sometimes called "sales loads") of 5 to 10 percent or higher. You cannot easily sell your shares back—some non-traded REITs have no secondary market at all, meaning you may be locked in for years. Expense ratios are often higher, sometimes 1.5 to 2.5 percent annually. REITactical explains why someone might choose a non-traded REIT despite these costs (usually because they believe the underlying properties will appreciate significantly), and what questions to ask before you do.

Understanding fees, yields, and how they affect your actual return

The dividend yield is the annual dividend divided by the share price—if a REIT costs $50 per share and pays $2 per year in dividends, the yield is 4 percent. But that is not your total return. You also have to account for whether the share price goes up or down, and you have to subtract fees. REITactical breaks down how to calculate your real return after expenses, and why a REIT with a 5 percent yield and a 2 percent expense ratio is not the same as a REIT with a 5 percent yield and a 0.3 percent expense ratio.

The platform also explains leverage—the practice of borrowing money to buy more properties. Most REITs use debt to amplify returns when property values and rents are rising, but leverage also amplifies losses when the market turns. REITactical shows you how to read a REIT's debt-to-equity ratio and what it means for the stability of your dividend.

Tax treatment of REIT dividends and where to hold them

REIT dividends are taxed as ordinary income, not as may have access to dividends like most stock dividends. That means if you hold a REIT in a taxable brokerage account, you pay your full income tax rate on the dividend, not the lower capital gains rate. For that reason, many investors hold REITs inside retirement accounts (IRAs, 401(k)s) where the dividend is not taxed annually. REITactical explains this trade-off and helps you think through whether a REIT belongs in a taxable account or a retirement account in your situation.

The platform also covers depreciation deductions—REITs can deduct the theoretical wear and tear on buildings, which lowers their taxable income and sometimes means your dividend includes a return of capital rather than pure income. That affects how you report the dividend on your tax return.

What REITactical does not do

REITactical does not recommend specific REITs, tell you how much money to invest, or suggest whether REITs are right for your portfolio. It does not manage accounts or execute trades. It does not give personalized financial advice based on your age, income, risk tolerance, or goals. If you need that kind of guidance, you will work with a financial advisor, broker, or investment manager—and REITactical is meant to prepare you for that conversation by teaching you the language and mechanics of REIT investing.

The platform also does not cover every type of REIT or every strategy. It focuses on the fundamentals that apply across most REIT investments, so you understand the core concepts before diving into specialized or complex structures.

How to use REITactical as part of your research

Start by reading the sections that match your current knowledge level. If you have never heard of a REIT, begin with the basics—what a REIT is, how it makes money, and why the trust structure exists. If you already own stocks but are new to REITs, jump to the sections on publicly traded versus non-traded REITs and tax treatment. If you are considering a non-traded REIT through an advisor, read the fee and cost sections carefully so you can ask informed questions.

Take notes on terms and concepts that are new to you, then bring those questions to a financial advisor or broker. REITactical gives you the foundation; a licensed professional can help you apply that knowledge to your specific situation. Many people find it helpful to read through REITactical once, then return to specific sections as they evaluate particular REITs or make decisions about where to hold them in their portfolio.

Frequently Asked Questions

Do I need to be rich to invest in REITs?

No. Publicly traded REITs can be bought through any brokerage account with as little as the price of one share, which varies but is often under $100. Non-traded REITs typically have higher minimum investments, sometimes $25,000 or more, but publicly traded REITs are accessible to most investors. REITactical explains both options so you understand what is available at different investment levels.

Are REITs safer than owning rental property directly?

They are different, not necessarily safer. REITs are liquid (you can sell quickly) and require no management, but you have no control over which properties the REIT buys or how it operates. Direct property ownership gives you control but ties up capital, requires active management, and is hard to sell quickly. REITactical covers the trade-offs so you can think through which approach fits your situation.

What happens to my REIT dividend if the real estate market crashes?

The dividend can be cut or eliminated if the REIT's properties lose value or tenants stop paying rent. REITactical explains how to read a REIT's financial statements to understand how stable the dividend is, and what metrics suggest a dividend might be at risk. This is why looking at the underlying properties and tenant quality matters, not just the yield.

Can I hold a non-traded REIT in a retirement account?

Yes, but the high upfront fees and illiquidity make it less common. REITactical walks through the math of holding a non-traded REIT in an IRA or 401(k), and why most financial advisors recommend publicly traded REITs for retirement accounts instead.

How do I know if a REIT is a good investment?

REITactical teaches you what to look for—stable or growing rents, quality tenants, reasonable debt levels, and fees that are not eating up your returns. It does not tell you which specific REITs meet those criteria, but it gives you the framework to evaluate them or to ask your advisor the right questions.