Real Estate Investment Trusts (REITs) allows people to invest in wealth-generating real estate. The REIT is a corporation that generally owns and manages properties that generate income or related activities. These may include office buildings, shopping centers, apartments, hotels, resorts, warehouses, deposits, and mortgages or loans. Unlike other real estate companies, REIT does not develop properties to sell them. Instead, a REIT acquires and develops homes primarily to manage as part of its investment portfolio.
Why would someone invest in the REIT?
REITs offer individual investors a way to earn a share of their income through commercial real estate without having to buy commercial real estate.
What kinds of REITs are there?
Several REITs are registered with the SEC and publicly traded. These are known as REIT traded on the stock exchange. Others may be listed with the SEC but do not sell openly. These are called non-traded REITs. This is one of the several significant contrasts between different types of REITs. Before investing in a REIT, you need to know if it is publicly traded and how it can affect the interests and risks to you.
What are the risks and benefits of REITs?
REITs provide a way to include real estate in your investment portfolio. Also, some REITs may offer higher dividends than other investments.
However, there are certain risks, particularly for unlisted REITs. As they are not publicly traded, inaccessible REITs present particular risks:
How to buy and sell REITs
You can invest in a REIT listed on a large market, buying shares through a broker. You can buy shares of a non-marketed REIT through a participating broker in the unlisted REIT offer. It is likewise probable to buy shares of a real estate investment trust or a listed REIT.
Understand taxes and fees
Publicly traded REITs may be purchased through a broker. Generally, it is possible to buy common shares, preferred shares, or debts of a publicly traded company. Brokerage commissions will be applied.
A broker or financial consultant generally sell Non-recommended REITs. Unencumbered REITs have typically high initial rates. Sales commissions and early tender rates generally generate approximately 9-10% of the investment. These costs reduce the amount of investment by a significant amount.
Special tax considerations
Most REITs pay their shareholders at least 100% of their taxable income. The shareholders of a REIT are liable for the payment of dividend taxes and capital profits they receive in consolidation with their stake in the REIT. Dividends paid by the REIT are generally considered ordinary income and are not eligible for tax reductions on other types of corporate profits. Remember to consult your tax advisor before investing in REITs.
Avoid scams
Pay attention to those trying to sell REITs that are not registered with the SEC.
It is possible to check the list of REITs quoted and not marketed via the EDGAR system of the SEC. You may also use EDGAR to review the REIT's annual and quarterly reports, as well as any prospectuses. You should also consult your dealer or investment advisor who recommends buying a REIT.
The TaxAdvocate Group, LLC