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- About Us

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• Glossary
• Información en Español
  
  - Introduction to Investing - Beginning - Five Questions to Ask Before You Invest
• Understanding Fees
• Asset Allocation
• Assessing Your Risk Tolerance
• Spending for Your Own
• Dealing with a Financial Investment Professional
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  1. Home.
• Introduction to Investing.
• Investment Products
  
  Main navigation
  
  - Save and Invest - Define Your Goals.
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  Real Estate Investment Trusts (REITs)
  
  What are REITs?
  
  Property financial investment trusts (" REITs") enable people to invest in large-scale, income-producing genuine estate. A REIT is a company that owns and generally operates income-producing property or associated properties. These might consist of office complex, malls, apartment or condos, hotels, resorts, self-storage centers, warehouses, and mortgages or loans. Unlike other realty business, a REIT does not develop property residential or commercial properties to resell them. Instead, a REIT purchases and establishes residential or commercial properties primarily to run them as part of its own financial investment portfolio.
  
  Why would someone buy REITs?
  
  REITs provide a method for individual investors to earn a share of the earnings produced through business property ownership - without really needing to go out and buy industrial property.
  
  What kinds of REITs are there?
  
  Many REITs are signed up with the SEC and are openly traded on a stock market. These are known as openly traded REITs. Others may be signed up with the SEC but are not openly traded. These are called non- traded REITs (also referred to as non-exchange traded REITs). This is one of the most important distinctions amongst the various kinds of REITs. Before buying a REIT, you need to understand whether or not it is openly traded, and how this might affect the benefits and risks to you.
  
  What are the advantages and threats of REITs?
  
  REITs provide a way to include realty in one's financial investment portfolio. Additionally, some REITs may provide higher dividend yields than some other financial investments.
  
  But there are some risks, especially with non-exchange traded REITs. Because they do not trade on a stock market, non-traded REITs include unique risks:
  
  Lack of Liquidity: Non-traded REITs are illiquid investments. They generally can not be offered readily on the open market. If you require to offer a property to raise money rapidly, you may not be able to do so with shares of a non-traded REIT. Share Value Transparency: While the market cost of a publicly traded REIT is readily accessible, it can be hard to figure out the value of a share of a non-traded REIT. Non-traded REITs normally do not offer a price quote of their value per share until 18 months after their offering closes. This might be years after you have actually made your financial investment. As an outcome, for a substantial period you may be unable to evaluate the value of your non-traded REIT investment and its volatility. Distributions May Be Paid from Offering Proceeds and Borrowings: Investors might be drawn in to non-traded REITs by their reasonably high dividend yields compared to those of openly traded REITs. Unlike publicly traded REITs, however, non-traded REITs often pay distributions in excess of their funds from operations. To do so, they may utilize offering earnings and borrowings. This practice, which is typically not utilized by openly traded REITs, lowers the worth of the shares and the money offered to the company to buy additional assets. Conflicts of Interest: Non-traded REITs normally have an external manager instead of their own employees. This can lead to potential conflicts of interests with shareholders. For instance, the REIT might pay the external manager significant charges based upon the quantity of residential or commercial property acquisitions and possessions under management. These charge rewards may not always line up with the interests of shareholders.
  
  How to purchase and offer REITs
  
  You can purchase a publicly traded REIT, which is noted on a major stock market, by purchasing shares through a broker. You can buy shares of a non-traded REIT through a broker that takes part in the non-traded REIT's offering. You can also purchase shares in a REIT shared fund or REIT exchange-traded fund.
  
  Understanding charges and taxes
  
  Publicly traded REITs can be acquired through a broker. Generally, you can purchase the common stock, preferred stock, or financial obligation security of an openly traded REIT. Brokerage fees will use.
  
  Non-traded REITs are normally offered by a broker or monetary adviser. Non-traded REITs usually have high up-front costs. Sales commissions and in advance offering fees generally total roughly 9 to 10 percent of the investment. These expenses lower the worth of the financial investment by a considerable quantity.
  
  Special Tax Considerations
  
  Most REITS pay a minimum of 100 percent of their taxable income to their investors. The shareholders of a REIT are accountable for paying taxes on the dividends and any capital gains they get in connection with their financial investment in the REIT. Dividends paid by REITs generally are dealt with as ordinary income and are not entitled to the minimized tax rates on other types of corporate dividends. Consider consulting your tax advisor before purchasing REITs.
  
  Avoiding scams
  
  Be cautious of anyone who tries to offer REITs that are not signed up with the SEC.
  
  You can confirm the registration of both publicly traded and non-traded REITs through the SEC's EDGAR system. You can also utilize EDGAR to examine a REIT's annual and quarterly reports in addition to any offering prospectus. For more on how to utilize EDGAR, please check out Research Public Companies.
  
  You need to also take a look at the broker or investment advisor who suggests acquiring a REIT. To learn how to do so, please see Working with Brokers and Investment Advisers.
  
  Additional details
  
  SEC Investor Bulletin: Real Estate Investment Trusts (REITs)
  
  FINRA Investor Alert: Public Non-Traded REITs - Perform a Careful Review Before Investing
  
  Featured Content
  
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