A Real Estate Investment Trust, commonly referred to as a REIT, is a company that owns or finances real estate across a broad portfolio. To qualify as a REIT, the company will have to meet several requirements. These companies can offer a number of benefits to Phoenix investors who want to grow their portfolio or even get started in real estate investing.
How Does a REIT Work for Phoenix Investors?
One of the advantages to investing in a REIT is that anyone can do it. You’ll invest in a portfolio of real estate assets the same way you might invest in other industries. You can buy stock or mutual funds, understanding that you earn a share of what’s earned without having to buy it or manage it yourself.
Individuals can invest in REITs through a 401(k), IRA, pension plan, and other investment funds.
Historically, this type of investment has worked well for investors. Returns are competitive and typically based on high dividend income and long-term appreciation. Many investors will diversify their portfolios with REITS.
Advantages to Investing in REITS
If you’re looking to invest in real estate, but you’re not sure you have the resources to get started, a REIT is an excellent opportunity. This type of investment allows you to benefit from the earnings real estate can provide. You can also access dividend-based income and total returns.
Here are some of the additional benefits and advantages to this type of real estate investing:
- There’s a much lower cost to enter the market, especially when you compare it to buying real property yourself.
When you compare to other stocks, Most REITS will pay above-average dividend yields.
You can diversify your entire investment portfolio this way, having something other than stocks to rely on.
You won’t have to worry about double taxation because REITS don't pay federal corporate income tax.
Publicly traded REITs offer greater liquidity compared to owning real estate outright.
Public REITs are highly transparent, including providing audited financial statements.
As with every investment product, there are some drawbacks as well, and potential challenges. When interest rates change, REITs are often affected. Some investors find there are higher tax liabilities, with the nonqualified dividends paid by REITs. This type of investment is best held in a tax-advantaged account like an IRA.
Talk to Investment Professionals for Help
There are several different kinds of REITS to invest in.
You’ll find private REITS and public REITs. There are non-traded REITS and REIT preferred stocks. The options are often dizzying and unless you’re an expert yourself, you’ll want to reach out and get some professional help. Smart investors understand the value and the necessity of good advice. You want to make smart decisions, and that requires you to surround yourself with experienced professionals.
The benefits of residential real estate as an individual purchase include: appreciation, depreciation, loan reduction, cashflow, and possible equity capture at acquisition. The REITS offer some of these benefits as well, but when you buy real estate outright, you can leverage your investment and this way, the returns can be much higher than REITs.
We work with a lot of investors, property owners, real estate networks, and investment professionals. We’d be happy to tell you what we know, and share some of our contacts and resources.
Contact us at Service Star Realty.
Service Star Realty
2929 East Camelback Road #119, Phoenix, AZ 85016
(480) 426-9696
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