Real Estate Investment Trusts

Real Estate Investment Trusts
April 11, 2013

Real Estate Investment Trusts, or REITs for short, are great options for people without a lot of capital who wish to invest in real estate. These specialized companies buy and manage a variety of properties, from shopping malls to apartment buildings. Each Real Estate investment trusts typically invests in one type of property; you just have to find one that focuses on the real estate investment you’re interested in.

REITs operate very much like purchasing stock on the stock market; you pick a company that purchases the types of real estate you’re interested in and purchase shares of that company through a broker. Unlike the stock market, shareholders of REITS typically enjoy generous dividends; by law, REITs are required to distribute a high percentage of their returns to the shareholders.

Unlike the stock market, REITs avoid double taxation because they aren’t required to pay corporate taxes.

Because the REIT company does all the work, it’s a great choice for people who may have the capital to invest in real estate but don’t want to deal with the details, such as property management and repairs.

Another advantage of REITs is that not only do they offer a great income now, they also have a wonderful growth rate! Between property appreciation and the acquisition of new properties, REITs have a great income growth rate.

An alternative to contacting a broker to invest in REITs is to focus on mutual funds that deal exclusively in REITs. On the plus side, this option allows you to invest in a variety of different properties; on the down side, mutual funds have expenses that take away some of the profits. Mutual funds provide a safer alternative to people who don’t want to play Russian roulette with their funds.

As with any investment opportunity, do your research before you spend your hard earned cash. Typically, an investment portfolio can have up 10% of their assets invested in REITs; if your portfolio is for income purposes, you may want to assign up to 25%.