Real Estate Investment Trusts (REITs).

The.gov indicates it's main.
Federal government sites often end in.gov or.mil. Before sharing delicate info, make sure you're on a federal government site.

The website is safe and secure.
The https:// guarantees that you are linking to the official site and that any information you provide is encrypted and transmitted safely.

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
- Investing on Your Own
- Working 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.
- Public 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.
- Determine Your Finances.
- Gauge Your Risk Tolerance.
- Learn More About Investment Options.
- Settle 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.
- Kinds of Orders.
- Kinds 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.
- Time Frame 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?

Real estate investment trusts (" REITs") permit individuals to invest in large-scale, income-producing realty. A REIT is a company that owns and generally operates income-producing property or related assets. These might include office complex, shopping malls, homes, hotels, resorts, self-storage facilities, storage facilities, and mortgages or loans. Unlike other property companies, a REIT does not establish property residential or commercial properties to resell them. Instead, a REIT purchases and establishes residential or commercial properties primarily to operate them as part of its own financial investment portfolio.

Why would someone buy REITs?

REITs supply a method for private financiers to make a share of the income produced through industrial realty ownership - without actually having to go out and purchase business property.

What kinds of REITs exist?

Many REITs are signed up with the SEC and are publicly traded on a stock exchange. These are understood as openly traded REITs. Others may be signed up with the SEC but are not publicly traded. These are understood as non- traded REITs (also referred to as non-exchange traded REITs). This is one of the most essential distinctions amongst the numerous sort of REITs. Before buying a REIT, you must comprehend whether it is publicly traded, and how this might impact the advantages and risks to you.

What are the advantages and risks of REITs?

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

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

Lack of Liquidity: Non-traded REITs are illiquid financial investments. They usually can not be offered readily on the free market. If you need to sell a possession to raise cash rapidly, you may not have the ability to do so with shares of a non-traded REIT.
Share Value Transparency: While the marketplace rate of an openly traded REIT is readily accessible, it can be difficult to identify the worth of a share of a non-traded REIT. Non-traded REITs typically do not supply a quote of their worth per share till 18 months after their offering closes. This might be years after you have actually made your investment. As an outcome, for a significant period you may be unable to examine the worth of your non-traded REIT financial investment and its volatility.
Distributions May Be Paid from Offering Proceeds and Borrowings: Investors might be brought in to non-traded REITs by their reasonably high dividend yields compared to those of publicly traded REITs. Unlike openly traded REITs, nevertheless, non-traded REITs often pay circulations in excess of their funds from operations. To do so, they may use providing profits and loanings. This practice, which is normally not utilized by publicly traded REITs, lowers the value of the shares and the cash available to the business to purchase additional properties.
Conflicts of Interest: Non-traded REITs typically have an external supervisor rather of their own staff members. This can result in possible disputes of interests with investors. For example, the REIT might pay the external manager considerable charges based upon the quantity of residential or commercial property acquisitions and properties under management. These cost incentives might not necessarily line up with the interests of investors.

How to purchase and sell REITs

You can invest in an openly traded REIT, which is noted on a significant 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 mutual fund or REIT exchange-traded fund.

Understanding fees and taxes

Publicly traded REITs can be purchased through a broker. Generally, you can purchase the common stock, chosen stock, or financial obligation security of a publicly traded REIT. Brokerage costs will use.

Non-traded REITs are usually offered by a broker or financial adviser. Non-traded REITs normally have high up-front charges. Sales commissions and upfront offering fees usually amount to roughly 9 to 10 percent of the investment. These expenses lower the worth of the financial investment by a substantial amount.

Special Tax Considerations

Most REITS pay out a minimum of 100 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 get in connection with their financial investment in the REIT. Dividends paid by REITs normally are dealt with as ordinary income and are not entitled to the lowered tax rates on other kinds of corporate dividends. Consider consulting your tax adviser before investing in REITs.

Avoiding fraud

Be careful of anybody who tries to offer REITs that are not signed up with the SEC.

You can validate the registration of both openly traded and non-traded REITs through the SEC's EDGAR system. You can likewise use EDGAR to examine a REIT's annual and quarterly reports in addition to any offering prospectus. For more on how to use EDGAR, please check out Research Public Companies.

You should likewise inspect out the broker or investment advisor who suggests acquiring a REIT. To learn how to do so, please visit Working with Brokers and Investment Advisers.

Additional information

SEC Investor Bulletin: Real Estate Investment Trusts (REITs)

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