Do you want to invest in real estate? Well, skip those too good to be true infomercial offers about flipping houses, and focus instead on a REIT or two. The acronym translates to: Real Estate Investment Trust.

By: Robert F. Abbott, freelance writer and author of Big Macs & Our Pensions

REITs operate like mutual funds in a way; they choose a real estate sector in which to invest and buy properties. At the same time they sell shares, entitling investors to share in the profits and losses.

As Jeff Brown points out in this U.S. News & World Report  article (December 16, 2015), you can buy into a REIT as you would buy a stock, or you can buy into a bundle of them with a mutual fund:

“Want to buy a shopping center, store or mall? You could rent out the property and get more income than from a bank or money market.

“Of course, unless you’re part of the 1 percent, owning retail property outright is out of the question. But ordinary investors can buy into retail properties the same way they buy into Alphabet (ticker: GOOG), Ford Motor Co. (F) or General Electric Co. (GE) – by owning shares.

“In this case, the vehicle is a real estate investment trust that works much like a mutual fund. There are REITs that own everything from resorts to hospitals to self-storage units, and one subset specializes in retail business space such as malls, shopping centers and free-standing stores.”

Brown notes America has 167 different REITs, and their worth totals some $900-million.

So far as I know, REITs don’t invest in individual residences; instead they invest in commercial, industrial, hotels, and those sorts of properties. One high profile type of REIT is retail, a field in which the operating company buys into shopping malls and properties housing stores.

Alternatively, you might buy into a REIT that specializes in hotels in a specific geographical region. If you have a strong desire to invest in residential housing, check out vehicles for investing in first and second mortgages.

Start with a REIT strategy

There are all sorts of REITs available, and you’ll need to have a strategy worked out before you can create a shortlist. To develop the strategy, read widely about REITs in general and about specific companies. You can visit any of the big mutual fund company websites and read what they recommend. In fact, go to at least a half dozen fund websites, to get a solid, broad-based view.

As noted, you can buy individual REITs in the same way you buy stocks. In that case, read the annual reports of at least half a dozen companies. In particular, make your way through the Management Discussion & Analysis section, as well as the letters from the Chairman and the CEO. Ask yourself what they’re not saying as well as what they are. This exercise will not make you an expert, but it will give you a feel for each of the businesses.

If buying a mutual fund or funds, always, check the MERs and potential load fees to ensure you don’t give up most of your dividends or capital gains to fund company fees. In any case, a REIT can be a good investment, allowing you to invest in real estate without first amassing a fortune.

Next, learn about Top Mutual Funds, as Defined by You