Real Estate Iinvestment Trusts (REITs)


REAL ESTATE INVESTMENT TRUSTS (REITs)

A real estate investment trust is a type of security that invests in real estate. REITs often have lower minimums than investing directly in real estate and offer more liquidity. They are not considered tax efficient since much of their return is taxed at ordinary income tax rates. REITS can be either public or private. It is important for your advisor to explain the difference.

THE PROs

  • Diversification of investments for modest capital commitments
  • Can be a good inflation hedge
  • Produce regular income

THE CONs

  • Can be expensive compared to other types of commingled investments such as mutual funds
  • Most of the returns generated are taxed as ordinary income

KEY QUESTIONS

1. Is this REIT public or private? Please explain the difference.

2. What amount of income can I expect from this REIT?

3. Please provide the manager’s track record versus the appropriate index.

4. What is the total fee for this investment including manager, commissions, operating expenses, etc.?

5. Please explain the liquidity. How can I get my money out and what are the penalties?

RELEVANT VIDEOS

LaSalle Investment Management explains REITs

www.reit.com offers a great look at the investment potential of REITs

Lawrence Rapp, Chairman of the SE REIT Association gives an excellent review