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
Why Real Estate Investment Trust
Real Estate Investment Trusts to Hedge the Stock and Bond Markets
Have you taken a look at your investment portfolio lately? If you have, and it's filled with the normal stock and bond investments, you may have noticed that there has been a lot of damage to those investments in the past year or so. With the credit crunch and the market crash, most investments are half, or less, of what they should be.
This is when you should consider what you should be doing to hedge those other investments. This is where REITs come in.
REITs are Real Estate Investment Trusts. These are funds where you fund a real estate management company. There are a variety of REITs out there. Some offer a way to back real estate developers who are taking on new ventures in construction. Others are meant to fund management of residential real estate such as apartment complexes, condominiums or even neighborhoods. Still others use the funds put into the REIT to operate commercial real estate interests.
I think Louis J. Glickman said it best when he said, "The best investment on earth is earth.” Real estate is always a wise investment. No matter what happens the land will always be there. Sure it may waiver in value from time to time, but in the long run, it will always be around, unlike businesses that can close their doors and take your investments down with them.
With this said, adding a REIT or two to your portfolio it would offer you a little more diversity and security in your investments.
You never know what the stock market will do. Just in the past few decades we have seen a number of sweeping changes in the market that completely broke some investors. Think of how many people you know who went bust during the Doc.com era.
Often the problem for them was they were too focused on the flavor of the month. They were putting everything they had into the new Dot.coms hoping to continue to ride the boom and make great profits. While they did see some great profits, those did not last forever. For those who kept putting everything they had into the doc.com market, they felt the agony of defeat in a major way when the market fell, many losing everything they had.
While there is nothing wrong with trying to jump in on an up and coming thing and make a great profit, it comes down to the old 'all your eggs in one basket' cliché. You don't want to have everything hedging on one investment. Instead have a diverse portfolio so if there is a drop in one area, you have other investments hedged against it.
In this case, even when there is a drop in the stock market and mutual funds, real estate usually will hold pretty strong through the down times, keeping you from feeling that all of your investments have been swept away.
When you're ready to take a step towards diversity, make sure to do it right. Going to a website like ReitBuyer.com will help you do just that. They will not only give you the research and information you need to buy wisely, but they are also real estate brokers for these investments and can help you seal the deal.
Have you taken a look at your investment portfolio lately? If you have, and it's filled with the normal stock and bond investments, you may have noticed that there has been a lot of damage to those investments in the past year or so. With the credit crunch and the market crash, most investments are half, or less, of what they should be.
This is when you should consider what you should be doing to hedge those other investments. This is where REITs come in.
REITs are Real Estate Investment Trusts. These are funds where you fund a real estate management company. There are a variety of REITs out there. Some offer a way to back real estate developers who are taking on new ventures in construction. Others are meant to fund management of residential real estate such as apartment complexes, condominiums or even neighborhoods. Still others use the funds put into the REIT to operate commercial real estate interests.
I think Louis J. Glickman said it best when he said, "The best investment on earth is earth.” Real estate is always a wise investment. No matter what happens the land will always be there. Sure it may waiver in value from time to time, but in the long run, it will always be around, unlike businesses that can close their doors and take your investments down with them.
With this said, adding a REIT or two to your portfolio it would offer you a little more diversity and security in your investments.
You never know what the stock market will do. Just in the past few decades we have seen a number of sweeping changes in the market that completely broke some investors. Think of how many people you know who went bust during the Doc.com era.
Often the problem for them was they were too focused on the flavor of the month. They were putting everything they had into the new Dot.coms hoping to continue to ride the boom and make great profits. While they did see some great profits, those did not last forever. For those who kept putting everything they had into the doc.com market, they felt the agony of defeat in a major way when the market fell, many losing everything they had.
While there is nothing wrong with trying to jump in on an up and coming thing and make a great profit, it comes down to the old 'all your eggs in one basket' cliché. You don't want to have everything hedging on one investment. Instead have a diverse portfolio so if there is a drop in one area, you have other investments hedged against it.
In this case, even when there is a drop in the stock market and mutual funds, real estate usually will hold pretty strong through the down times, keeping you from feeling that all of your investments have been swept away.
When you're ready to take a step towards diversity, make sure to do it right. Going to a website like ReitBuyer.com will help you do just that. They will not only give you the research and information you need to buy wisely, but they are also real estate brokers for these investments and can help you seal the deal.
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