What are REITs (Real Estate Investment Trusts)?
If you pride yourself on being an up and coming investor, you should make sure you know all of the investing options that are available to you.
While most people know of trading things like stocks and bonds, they may not know of the deeper levels of those things, such as REITs. REITs are Real Estate Investment Trusts. Essentially this is a company that purchases properties and then becomes a real estate management firm.
How you get involved in these investments is by giving them the funds to make those purchases and run them. Essentially, they will allow a certain number of investors to be a part of the trust (it is usually a limited number for each trust).
So where did REITs come from? Well the REIT was born in 1960 by congress. Before this time only those with major money were able to get into real estate investing. Everyone else had to play the regular stock market. So, they wanted to give smaller investors the chance to get in on the profit making market of real estate. With REITs instead of having to have the money to be able to purchase a whole property at once, an investor can get in to the market with just a percentage of the money buy buying one or more shares.
When choosing a REIT, it is important to realize that there are a variety of REIT styles. Usually a REIT sticks with one type of property. For example, there are commercial REITs that only deal with commercial real estate and ventures. They may purchase office space and rent it out to businesses. Another way to go is industrial, purchasing and maintaining industrial parks. There are also residential buildings that vary from apartment buildings to condominiums and even complete housing neighborhoods that are owned and operated by the REIT. If you know more about one kind of real estate than another, you may prefer to fund this style of REIT where you can invest in something you know about.
Understanding how REIT investments work is vital if you are considering going into this type of investment market. Here are some of the basics.
First, if a REIT makes money, its investors are going to make money. The way a REIT works is that as it makes taxable income, at least 90 percent of that must be paid directly to it's investors. That means as a shareholder, if the REIT is making any money, so are you!
When it comes to shareholders REITs run the gamut from small to massive, but even the small ones are not so small that they can't have any buying power. A REIT must have at least 100 shareholders.
When it comes to operations, REITs have a few major rules to follow. First, they are required to invest 75% or more of the money put into the trust in real estate ventures. Additionally, they have to be getting at least 75% of their income from monies made from the properties they own (i.e. through mortgage interest or rent)
If you are considering investing in REITs it is important to note that they are also a little different in tax structure. Since so much of the profit from a REIT is going to the shareholders, they are able to deduct that money from their taxable income. However, when you as in investor get your dividends you will be responsible for paying the capital gains taxes.
Before you invest, learn more. REITBuyer.com is not only a full service REIT broker, but also has research and educational information to help you get started and build your portfolio.
Tuesday, February 24, 2009
A Way to Invest in Realty Without the Responsibilities of Direct Property Ownership
Now is the time for Real Estate Investment Trusts
If you have been watching all the shifts in the investing markets, you may be a little worried about putting your money into any of them right now. Things have been falling and falling, how do you know where it will be safe to put your cash?
Perhaps it's time to look at some of the other investing options out there like real estate. I am not talking about running around and buying up any extra lots of property you happen to see around you. That comes with a lot of responsibilities and major outlay up front. Not only do you have to have the money to purchase the whole property, but you also have to be able to take care of it and maintain and manage it after the fact. This is a lot to ask for in an investment.
Instead, you may want to look into another type of real estate investing, real estate investment trusts. Real estate investment trusts or REITs are funds where you purchase shares of the investment and a real estate management group of real estate development group uses that money to purchase, build or maintain property ventures. You essentially fund a portion of a property acquisition and management group.
In return for your investment, you will be paid a portion of any profit that the company makes, much like a stock dividend.
While you may be wondering how wise it is to consider real estate in today's tough market, this is exactly why it may be a good time to look at a little more investing. Here's why. Sure, there has been a tough time for the markets. Lending has dropped, defaults on properties are on the rise. We're in tough credit times.
But now let's look at the positive side of things. Most think the slide has slowed and will soon be stopping. Add this to the fact that those capital markets that REITs use to get their funding for expansion and other purchases are low and that means the chances for REITs to get the capital they want to expand has dropped, for now. While you may think this is a bad sign, the truth is this is a time when the value of REITs is lower, meaning you can get in at a lower price. As things settle and go back to normal, your profits will go up and you will see an even greater return on your investment.
This is the time to log onto a website like REITBuyer.com and find out what REITs are out there, what they are selling for and get yourself in on this low tide so you can enjoy the ride when the financial wave picks up again.
With the other option being putting all of your money away and seeing no growth, what would you prefer?
Money Making Guru Robert G. Allen may have said it best saying, "How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case."
If you have been watching all the shifts in the investing markets, you may be a little worried about putting your money into any of them right now. Things have been falling and falling, how do you know where it will be safe to put your cash?
Perhaps it's time to look at some of the other investing options out there like real estate. I am not talking about running around and buying up any extra lots of property you happen to see around you. That comes with a lot of responsibilities and major outlay up front. Not only do you have to have the money to purchase the whole property, but you also have to be able to take care of it and maintain and manage it after the fact. This is a lot to ask for in an investment.
Instead, you may want to look into another type of real estate investing, real estate investment trusts. Real estate investment trusts or REITs are funds where you purchase shares of the investment and a real estate management group of real estate development group uses that money to purchase, build or maintain property ventures. You essentially fund a portion of a property acquisition and management group.
In return for your investment, you will be paid a portion of any profit that the company makes, much like a stock dividend.
While you may be wondering how wise it is to consider real estate in today's tough market, this is exactly why it may be a good time to look at a little more investing. Here's why. Sure, there has been a tough time for the markets. Lending has dropped, defaults on properties are on the rise. We're in tough credit times.
But now let's look at the positive side of things. Most think the slide has slowed and will soon be stopping. Add this to the fact that those capital markets that REITs use to get their funding for expansion and other purchases are low and that means the chances for REITs to get the capital they want to expand has dropped, for now. While you may think this is a bad sign, the truth is this is a time when the value of REITs is lower, meaning you can get in at a lower price. As things settle and go back to normal, your profits will go up and you will see an even greater return on your investment.
This is the time to log onto a website like REITBuyer.com and find out what REITs are out there, what they are selling for and get yourself in on this low tide so you can enjoy the ride when the financial wave picks up again.
With the other option being putting all of your money away and seeing no growth, what would you prefer?
Money Making Guru Robert G. Allen may have said it best saying, "How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case."
Subscribe to:
Posts (Atom)
