Investing in REITSInvesting in REITS (pronounced REETS) can be a great way to combine real estate investing with stock market investing. REITS are Real Estate Investment Trusts and can be privately held or publicly traded on a stock exchange.I love REITS and although they can go through periods of decline, I believe they are a great way for a real estate investor to diversify. The other reason I think it is great for a real estate investor to have some investment in REITS is because they can follow and learn how a big company is investing in real estate. This will broaden their horizon and education. Definition: REITS, real estate investment trusts, are securities that invest either directly in real estate or in mortgages or mortgage backed securities. REITS were created in 1960. They were made up mostly of mortgage REITS until the TAX REFORM ACT of 1986. Before the passage of the tax reform act in 1986, a company couldn't manage it's assets. The ownership and management of assets had to remain separate. After 1986 a lot of equity REITS came on the scene which is a REIT that owns properties. Investing in REITS has been popular because of several reasons: 1. People like the idea of their stock investment being in real estate because real estate is such a good investment. 2. Dividends are typically high for REITS since to be a REIT a company must distribute 90% of it's taxable income to shareholders in the form of a dividend. This allows the corporation to deduct the dividends paid from their corporate income tax. 3. REITS are a simple way to invest in real estate. To qualify a company must distribute 90% of it's taxable income to shareholders in the form of a dividend. They must also have over 75% of their assets in real estate investments. Personally, I recommend everyone to be investing in REITS, preferably equity REITS since they own the properties. If you are new to REITS, don't take a lot of money and pour into them, just take a little and start investing in some. You will need to pay attention to any company news, quarter and annual reports, earnings calls, etc. If you are a real estate investor who has never invested in the stock market this may seem like foreign territory. Don't worry, you can either learn some very basic stock market skills such as valuing a company's share price and reading financial statements or you can go to a reputable broker and have him or her help you analyze the company. It is a great thing for you as a real estate investor to do. Investing in REITS will diversify your portfolio and provide an education as you watch a big company invest in real estate. Here's another thing to consider- you can use an IRA to invest in REITS. Simply have your IRA be self-directed and direct the investments into REITS. One word of caution is that the dividends you receive from your investing in a REIT will count as regular income since the corporation passes the income through to the shareholder. Still, they are a great investment!!!
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