Real Estate Investment Trusts (REITS) – Video Guide
Video Transcript:
Do you know that there is a way to invest in real estate without owning a physical property? Real Estate Investment Trusts or REITS are companies that own, operate, or finance income-producing real estate projects. These companies pool money from many investors to purchase office buildings, apartment complexes, or shopping centers.
Investors can buy shares in REITs, like investing in stocks, and the shares are traded on major stock exchanges. This gives investors the opportunity to diversify their portfolios by investing in real estate without the complexities of directly owning a physical property. Many REITs can also provide passive income to investors in the form of dividends, distributions of a large portion of their income that they are required to make to shareholders. And unlike directly owning a physical property, REIT shares are relatively liquid, so they can be bought and sold more easily on the exchanges.
But there are certain unique qualities of REITs you should be aware of before you invest. Dividends from REITs are taxed as ordinary income, not at the more favorable qualified dividend rates, so that could affect your tax strategy. Because REITs are required to distribute a large portion of their income, that can limit their ability to reinvest in their properties or expand their portfolios. This can potentially limit their long-term growth. And while REITs can offer unique benefits to a portfolio, their performance can vary and underperform other investments at times.
Make sure you have all the facts before you decide to invest in REITs. If you’d like to learn more about REITs, call us today.
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