A Real Estate Investment Trust is a company that owns or finances income-producing real estate.

REITs real estate investment trusts offer easier investments, similar to purchasing stocks and bonds through mutual funds, in income-producing real estate, such as apartments, office complexes and shopping developments.

In the rest of the stock market, youre in the business cycle. With REITs, youre in the real estate market cycle, Brad Case, Ph.D. senior vice president of research and industry information at the National Association of Real Estate Investment Trusts, said. Because theyre a different cycle and because they have low correlations with the rest of the stock market and bond market, but also have very good returns, that means the volatility of your investment portfolio is less without sacrificing returns.

Higher education yeilds higher return

The student-housing sector remains a particularly strong area for REITs. With nationwide budget cuts, many colleges, universities and trade schools see themselves abandoning roles as student landlords. This provides a great opportunity for REIT investors. American Campus Communities pioneered this structure at Arizona State University, where they now own 5,000 beds of campus housing.

We expect to see, as the economy improves, a substantial increase in pretty much every part of the commercial real estate market, Case said. If you buy stock in a REIT, youre taking part in the improvement of the overall economy.

Its a win-win structure for all involved, Bill Bayless American Campus Communities president and CEO said. The universities get the benefit of modern housing delivered more timely and more cost effectively without using tax payer dollars, students receive the best products at the most affordable rents, and we get the benefit of owning core real estate with a premiere on-campus location operated in concert with the university.

A reflection on the economy

REITs typically share the same steady investment reputations as bonds, with one key difference. When interest rates go up, bond values tend to decrease due to their fixed income. Conversely, REITs usually improve with the economy and corresponding interests rate increases.

We expect to see, as the economy improves, a substantial increase in pretty much every part of the commercial real estate market, Case said. If you buy stock in a REIT, youre taking part in the improvement of the overall economy.