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• Glossary
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  - Introduction to Investing - Beginning - Five Questions to Ask Before You Invest
• Understanding Fees
• Asset Allocation
• Assessing Your Risk Tolerance - Investing on Your Own
• Dealing with a Financial Investment Professional - Researching Investments
  
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  1. Home.
• Introduction to Investing.
• Investment Products
  
  Main navigation
  
  - Save and Invest - Define Your Goals.
• Diversify Your Investments.
• Figure Out Your Finances. - Gauge Your Risk Tolerance.
• Learn More About Investment Options.
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• Small Savings Add Up to Big Money.
• Understand What It Means to Invest
  
  - Public Companies.
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  - Auction Rate Securities.
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  - How to Submit Comments to the SEC.
• Researching the Federal Securities Laws Through the SEC Website.
• The Laws That Govern the Securities Industry
  
  Real Estate Investment Trusts (REITs)
  
  What are REITs?
  
  Realty investment trusts (" REITs") allow people to invest in large-scale, income-producing real estate. A REIT is a business that owns and normally runs income-producing realty or related possessions. These may include office complex, shopping malls, homes, hotels, resorts, self-storage facilities, storage facilities, and mortgages or loans. Unlike other property business, a REIT does not establish realty residential or commercial properties to resell them. Instead, a REIT purchases and establishes residential or commercial properties mostly to run them as part of its own investment portfolio.
  
  Why would somebody buy REITs?
  
  REITs supply a method for individual financiers to make a share of the earnings produced through business property ownership - without really having to go out and buy business real estate.
  
  What types of REITs are there?
  
  Many REITs are registered with the SEC and are openly traded on a stock exchange. These are referred to as openly traded REITs. Others may be signed up with the SEC but are not openly traded. These are understood as non- traded REITs (also referred to as non-exchange traded REITs). This is one of the most crucial distinctions among the various type of REITs. Before investing in a REIT, you ought to comprehend whether it is openly traded, and how this could impact the advantages and dangers to you.
  
  What are the benefits and dangers of REITs?
  
  REITs offer a method to include property in one's financial investment portfolio. Additionally, some REITs might offer higher dividend yields than some other financial investments.
  
  But there are some risks, especially with non-exchange traded REITs. Because they do not trade on a stock exchange, non-traded REITs include unique dangers:
  
  Lack of Liquidity: Non-traded REITs are illiquid financial investments. They normally can not be sold readily on the open market. If you need to offer a property to raise cash quickly, you might not be able to do so with shares of a non-traded REIT. Share Value Transparency: While the marketplace price of an openly traded REIT is easily accessible, it can be difficult to figure out the value of a share of a non-traded REIT. Non-traded REITs usually do not offer an estimate of their worth per share till 18 months after their offering closes. This may be years after you have actually made your financial investment. As a result, for a considerable time duration you may be unable to evaluate the worth of your non-traded REIT investment and its volatility. Distributions May Be Paid from Offering Proceeds and Borrowings: Investors may be drawn in to non-traded REITs by their fairly high dividend yields compared to those of publicly traded REITs. Unlike publicly traded REITs, nevertheless, non-traded REITs regularly pay distributions in excess of their funds from operations. To do so, they may use offering earnings and borrowings. This practice, which is typically not utilized by openly traded REITs, decreases the value of the shares and the cash readily available to the business to acquire extra properties. Conflicts of Interest: Non-traded REITs typically have an external supervisor rather of their own workers. This can result in potential disputes of interests with shareholders. For instance, the REIT may pay the external manager significant costs based upon the quantity of residential or commercial property acquisitions and properties under management. These charge rewards may not always line up with the interests of shareholders.
  
  How to buy and offer REITs
  
  You can buy a publicly traded REIT, which is noted on a significant stock exchange, by acquiring shares through a broker. You can purchase shares of a non-traded REIT through a broker that participates in the non-traded REIT's offering. You can likewise buy shares in a REIT shared fund or REIT exchange-traded fund.
  
  Understanding fees and taxes
  
  Publicly traded REITs can be acquired through a broker. Generally, you can purchase the typical stock, preferred stock, or debt security of an openly traded REIT. Brokerage charges will apply.
  
  Non-traded REITs are normally sold by a broker or monetary advisor. Non-traded REITs typically have high up-front charges. Sales commissions and upfront offering costs typically total roughly 9 to 10 percent of the financial investment. These expenses lower the worth of the investment by a considerable quantity.
  
  Special Tax Considerations
  
  Most REITS pay out a minimum of one hundred percent of their taxable earnings to their . The shareholders of a REIT are accountable for paying taxes on the dividends and any capital gains they get in connection with their investment in the REIT. Dividends paid by REITs normally are treated as regular income and are not entitled to the lowered tax rates on other types of corporate dividends. Consider consulting your tax adviser before investing in REITs.
  
  Avoiding scams
  
  Be cautious of anyone who tries to sell REITs that are not registered with the SEC.
  
  You can verify the registration of both openly traded and non-traded REITs through the SEC's EDGAR system. You can likewise use EDGAR to examine a REIT's annual and quarterly reports along with any offering prospectus. For more on how to utilize EDGAR, please check out Research Public Companies.
  
  You should also have a look at the broker or financial investment adviser who recommends buying a REIT. To find out how to do so, please visit Dealing with Brokers and Investment Advisers.
  
  Additional details
  
  SEC Investor Bulletin: Real Estate Investment Trusts (REITs)
  
  FINRA Investor Alert: Public Non-Traded REITs - Perform a Careful Review Before Investing
  
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