There’s so much to real estate investment trusts or REIT has to offer. It’s a great way to learn, invest and earn from.
On September 14, 1960, new legislation was signed by President Dwight D. Eisenhower that initiated a novel way to invest in income-producing real estate. It became widely popular because it integrated the key elements of real estate and stock-based investment. These benefits were once accessible only to large financial intermediaries, and wealthy individuals were given to the common person along with the merits of commercial real estate investment. Moreover, this step made it effortless for investors to build a diversified real estate portfolio.
Real estate investment trusts (REIT) permit you to invest in commercial real estate property without the need for literally buying and managing those properties on your own. They are becoming widely popular because, today, more and more investors are looking to expand their portfolios beyond the limits of publicly-traded company stocks and mutual funds.
REITs are companies that own and manage real estates that would generate income. They could be warehouses, self-storage, apartments, hotels, facilities and malls. Almost all dependable REITs possess a track record for paying a substantial and growing amount as dividends. However, that does not mean that they come without risks; as always, it depends on REIT.
Some standards set by the Internal Revenue Service
- You need to invest at least 75% of your total assets in real estate or cash.
- You need to own at least 100 shareholders following the first year.
- You should not own more than 50% of shares carried by five (or lesser) individuals in the last half of the taxable year.
- You must get a minimum of 75% of the gross income from real estate. This could be rent, interest on the mortgage, or deriving out of the sale of real estate.
You need to return a minimum of 90% of taxable income as shareholder dividends every year. It is a significant downside to investor interest in REITs. However, by adhering to these rules, REITs are not required to pay tax at the corporate level. This permits them to obtain money or credit from real estate more inexpensively than other non-REIT companies. This is why REITs compensate more enormous dividends than others over time.
Some online trading platforms that allow you to invest in real estate properties:
- iShares U.S. Real Estate ETF
- Fidelity MSCI Real Estate Index ETF
- Invesco Active U.S. Real Estate ETF
- Real Estate Select Sector SPDR Fund
- iShares Cohen and Steers REIT ETF
REIT stocks that perform well
- Safehold Inc.
- Goodman Group
- Innovative Industrial Properties Inc
- Equinix Inc
- Power REIT
Some REIT mutual funds you can consider
- Principal Real Estate Securities Fd R-6
- TIAA-CREF Real Estate Sec Advisor
- PGIM US Real Estate Z
- Cohen & Steers Real Estate Securities Z
- Neuberger Berman Real Estate R6
Some REIT ETFs you can consider
- iShares Cohen & Steers REIT ETF
- iShares U.S. Real Estate ETF
- Fidelity MSCI Real Estate Index ETF
- Invesco Active U.S. Real Estate ETF
