Real Estate Investment Trusts (REITs).

The.gov means it's main.
Federal government sites frequently end in.gov or.mil. Before sharing delicate information, make certain you're on a federal government site.

The site is safe and secure.
The https:// ensures that you are linking to the main website and that any details you supply is encrypted and transmitted firmly.

Auxiliary Header

- About Us
- Contact Us
- Follow Us
- 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 an Investment Professional
- Researching Investments

- Save and Invest
- Invest For Your Goals
- How Stock Markets Work
- Investment Products
- What is Risk?
- Role of the SEC
- Glossary

- Investor Alerts & Bulletins
- PAUSE List
- Publications and Research

- Financial Tools - Investment Professional Background Check
- EDGAR - Search Company Filings
- Fund Analyzer
- Retirement Ballpark E$ timate.
- Social Security Retirement Estimator

- Compound Interest Calculator.
- Calculadora de distribución mínima requerida.
- Calculadora de interés compuesto.
- Savings Goal Calculator.
- Calculadora de objetivo de ahorro.
- Required Minimum Distribution Calculator.
- College Savings Calculator

- Fraud - Kinds of Fraud.
- How to Avoid Fraud.
- Resources for Victims

- Submit Questions and Complaints.
- Arbitration and Mediation Clinics

- Spotlight - Crypto Assets.
- Director's Take.
- HoweyTrade.
- Never Stop Learning.
- Civil Service Campaign.
- World Investor Week.
- Investing Quizzes.
- Microcap Fraud.
- Videos

- First Job.
- Switching Jobs.
- Employer-Sponsored Plans.
- Federal Government Plans.
- Individual Retirement Accounts (IRAs).
- Managing Lifetime Income.
- Senior Specialist Designations.
- Social Security.
- Avoiding Retirement Fraud

- Librarians.
- Older Investors.
- Teachers.
- Military.
- Veterans.
- Youth.
- Entrepreneurs

Breadcrumb

1. Home.
2. Introduction to Investing.
3. Investment Products

Main navigation

- Save and Invest - Define Your Goals.
- Diversify Your Investments.
- Figure Out Your Finances.
- Gauge Your Risk Tolerance.
- Learn About Investment Options.
- Pay Off Credit Cards or Other High Interest Debt.
- Save for a Rainy Day.
- Small Savings Add Up to Big Money.
- Understand What It Means to Invest

- Public Companies.
- Market Participants.
- Types of Orders.
- Types of Brokerage Accounts.
- Stock Purchases and Sales: Long and Short.
- Executing an Order

- Auction Rate Securities.
- Bonds or Fixed Income Products - Bonds.
- Corporate Bonds.
- High-yield Corporate Bonds.
- Municipal Bonds.
- Savings Bonds

- Interval Funds.
- Publicly Traded Business Development Companies (BDCs).
- Publicly Traded Closed-End Funds

- Annuities.
- Indexed Annuities.
- Variable Annuities.
- Variable Life Products

- Alternative Mutual Funds.
- Leveraged Loan Funds.
- Exchange-Traded Funds (ETFs).
- Index Funds.
- Money Market Funds.
- Mutual Funds.
- Smart Beta, Quant Funds and other Non- Traditional Index Funds.
- Target Date Funds

- Hedge Funds.
- Private Equity Funds

- 401( k).
- 403( b) and 457( b).
- IRA (Individual Retirement Accounts)

- How to Submit Comments to the SEC.
- Researching the Federal Securities Laws Through the SEC Website.
- The Laws That Govern the Securities Industry

Real Estate Investment Trusts (REITs)

What are REITs?

Realty financial investment trusts (" REITs") allow people to buy massive, income-producing genuine estate. A REIT is a company that owns and usually operates income-producing realty or associated assets. These may consist of office complex, going shopping malls, apartment or condos, hotels, resorts, self-storage facilities, storage facilities, and mortgages or loans. Unlike other genuine estate business, a REIT does not develop realty residential or commercial properties to resell them. Instead, a REIT purchases and develops residential or commercial properties mostly to run them as part of its own financial investment portfolio.

Why would someone invest in REITs?

REITs supply a method for private investors to make a share of the income produced through industrial property ownership - without in fact having to go out and purchase commercial realty.

What types of REITs are there?

Many REITs are registered with the SEC and are openly traded on a stock market. These are referred to as openly traded REITs. Others may be registered with the SEC however are not openly traded. These are referred to as non- traded REITs (also known as non-exchange traded REITs). This is among the most important distinctions amongst the numerous type of REITs. Before buying a REIT, you need to comprehend whether or not it is openly traded, and how this might affect the advantages and risks to you.

What are the advantages and risks of REITs?

REITs offer a method to include realty in one's financial investment portfolio. Additionally, some REITs might offer higher dividend yields than some other financial investments.

But there are some threats, especially with non-exchange traded REITs. Because they do not trade on a stock market, non-traded REITs involve special risks:

Lack of Liquidity: Non-traded REITs are illiquid investments. They typically can not be sold readily on the open market. If you require to offer an asset to raise money rapidly, you might not have the ability to do so with shares of a non-traded REIT.
Share Value Transparency: While the market price of a publicly traded REIT is readily available, it can be hard to figure out the value of a share of a non-traded REIT. Non-traded REITs normally do not provide an estimate of their worth per share until 18 months after their offering closes. This might be years after you have made your financial investment. As a result, for a substantial period you may be unable to assess the value of your non-traded REIT investment and its volatility.
Distributions May Be Paid from Offering Proceeds and Borrowings: Investors may be brought in to non-traded REITs by their fairly high dividend yields compared to those of openly traded REITs. Unlike openly traded REITs, nevertheless, non-traded REITs frequently pay circulations in excess of their funds from operations. To do so, they might use providing profits and borrowings. This practice, which is generally not used by publicly traded REITs, decreases the worth of the shares and the money available to the company to buy additional properties.
Conflicts of Interest: Non-traded REITs typically have an external manager rather of their own staff members. This can cause prospective conflicts of interests with investors. For example, the REIT might pay the external supervisor substantial costs based upon the amount of residential or commercial property acquisitions and possessions under management. These charge incentives may not necessarily line up with the interests of shareholders.

How to purchase and sell REITs

You can buy a publicly traded REIT, which is noted on a significant stock market, by acquiring 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 likewise buy shares in a REIT mutual fund or REIT exchange-traded fund.

Understanding fees and taxes

Publicly traded REITs can be bought through a broker. Generally, you can buy the typical stock, preferred stock, or financial obligation security of a publicly traded REIT. Brokerage charges will apply.

Non-traded REITs are typically offered by a broker or financial adviser. Non-traded REITs normally have high up-front fees. Sales commissions and in advance offering charges normally total around 9 to 10 percent of the investment. These expenses lower the worth of the financial investment by a considerable amount.

Special Tax Considerations

Most REITS pay at least one hundred percent of their taxable earnings to their shareholders. The investors of a REIT are accountable for paying taxes on the dividends and any capital gains they receive in connection with their financial investment in the REIT. Dividends paid by REITs generally are treated as normal income and are not entitled to the minimized tax rates on other types of business dividends. Consider consulting your tax advisor before buying REITs.

Avoiding scams

Watch out for any person who attempts to sell REITs that are not registered with the SEC.

You can validate the registration of both publicly traded and non-traded REITs through the SEC's EDGAR system. You can likewise use EDGAR to evaluate a REIT's annual and quarterly reports along with any offering prospectus. For more on how to use EDGAR, please see Research Public Companies.

You need to also take a look at the broker or financial investment adviser who suggests acquiring a REIT. To learn how to do so, please go to Working with Brokers and Investment Advisers.

Additional info

SEC Investor Bulletin: Real Estate Investment Trusts (REITs)

FINRA Investor Alert: Public Non-Traded REITs - Perform a Careful Review Before Investing