Finance & Money
This group is focused on promoting financial literacy and empowerment for our communities. We do... View more
Organizer:
- Organized by
-
-
Investments – REITS another way to invest in property
-
Investments – REITS another way to invest in property
What is a REIT?
Real estate investment trusts (REITs) are companies that own real estate. You can buy shares in REITs similar to stock, and you mainly make money from REITs through dividends. REITs often own apartments, warehouses, self-storage facilities, malls and hotels. You can purchase REITs through an investment account, also called a brokerage account, similar to stocks.
How do REITs work?
Congress created real estate investment trusts in 1960 as a way for individual investors to own equity stakes in large-scale real estate companies, just as they could own stakes in other businesses. This move made it easy for investors to buy and trade a diversified real-estate portfolio.
REITs are required to meet certain standards set by the IRS, including that they:
Return a minimum of 90% of taxable income in the form of shareholder dividends each year. This is a big draw for investor interest in REITs.
Invest at least 75% of total assets in real estate or cash.
Receive at least 75% of gross income from real estate, such as real property rents, interest on mortgages financing the real property or from sales of real estate.
Have a minimum of 100 shareholders after the first year of existence.
Have no more than 50% of shares held by five or fewer individuals during the last half of the taxable year.
By adhering to these rules, REITs don’t have to pay tax at the corporate level, which allows them to finance real estate more cheaply — and earn more profit to disburse to investors — than non-REIT companies can. This means that over time, REITs can grow bigger and pay out even larger dividends.
» Related: Understand different types of real estate investments
How much can I make with REITs?
When comparing potential returns it can be helpful to look at benchmarks. The S&P 500 is a collection of five hundred of the biggest U.S. companies. When you look at their collective performance, that’s how the S&P 500 has performed. The FTSE NAREIT All Equity REITs Index, similarly, tracks the performance of equity REITs. And from 1972 to 2019, REITs, on average, returned an 11.8% total annual return compared to the S&P’s 10.6%
.
That’s not to say that REITs are better than stocks — it’s simply one metric to look at. That being said, if you were to invest in REITs in addition to stocks, you would diversify your portfolio and likely be more protected against risk.
Check into a variety of brokerages if interested.
*This is not investment advice
-
0 Replies
Sorry, there were no replies found.
Log in to reply.
