{"id":595,"date":"2014-08-15T00:06:35","date_gmt":"2014-08-15T07:06:35","guid":{"rendered":"https:\/\/shellyrobersonrealtor.com\/?p=595"},"modified":"2014-08-29T11:06:37","modified_gmt":"2014-08-29T18:06:37","slug":"what-are-real-estate-investment-trusts-all-about-and-why-they-might-be-for-you","status":"publish","type":"post","link":"https:\/\/shellyrobersonrealtor.com\/what-are-real-estate-investment-trusts-all-about-and-why-they-might-be-for-you\/","title":{"rendered":"What Are Real Estate Investment Trusts All About – And Why They Might Be For You"},"content":{"rendered":"
Real Estate Investment Trusts or \u201cREITs\u201d are companies or corporations or other entities that owns, and most commonly operates a portfolio or income-producing real estate or real estate-related assets.\u00a0 REITs are designed for individual investors to earn portions or shares or fractions of the income produced through commercial real estate ownership.\u00a0 The beauty of which is the investor is not required to actually go out and purchase the commercial real estate themselves as others have already done that. REITs come in all categories and may include office buildings, shopping malls, resorts, apartments, self-storage facilities, hotels, warehouses, and mortgages or bundled mortgage loans.<\/p>\n
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<\/a><\/p>\n REITs typically specialize in a single type of asset class.\u00a0 For example, apartment communities may be the focus of one REIT.\u00a0 There are REITs of all dimensions including retail, office, residential, healthcare and industrial as examples.<\/p>\n REITs are required to primarily hold and operate the properties that they develop.\u00a0 This distinguishes REITs from other real estate companies.\u00a0 Most real estate investors and developers are always looking at reselling the properties after they have been developed.<\/p>\n For the IRS to qualify a company as a REIT, a company must have the majority of its assets and income in real estate investments and must distribute a minimum of 90 percent of its taxable income to shareholders or members annually in the form of dividends.<\/p>\n <\/a><\/p>\n A REIT shall have these qualifications as well:<\/p>\n <\/a><\/p>\n REITs fall into three categories:\u00a0 Equity REITs, Mortgage REITs, and Hybrid REITs.<\/p>\n Most REITs are equity REITs.\u00a0 Equity REITs commonly own and operate all types of income-producing real estate (discussed above).\u00a0 These types of REITs are generally not as leveraged as mortgage REITs.<\/p>\n Mortgage REITs provide money to real estate owners and operators either directly in the form of mortgages or other types of real estate loans, or indirectly through the acquisition of mortgage-backed securities.\u00a0 Mortgage REITs tend to be more leveraged (using borrowed capital) than equity REITs.\u00a0 In addition, many mortgage REITs manage their interest rate and credit risks through the use of derivatives and other hedging techniques.<\/p>\n It is imperative that you understand the risks of these strategies before deciding to invest in these types of REITs.\u00a0 Standard brokerages offer REITs as investment tools in 401Ks, IRAs, brokerage accounts, and other investment accounts.\u00a0 Please take time to read the disclosures for the REIT you are interest in before actually investing.<\/p>\n Hybrid REITs are companies that use the investment strategies of both equity REITs and mortgage REITs.<\/p>\n The most stable and well-known REITs (whether equity or mortgage) are registered with the Securities and Exchange Commission and are publicly traded on a stock exchange (publicly traded REITs).<\/p>\n\n
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Categories of REITs<\/h2>\n