A REIT, or Real Estate Investment Trust, is a company that manages portfolios of real estate and property investments. One of the many pluses of investing in REITs is there high dividends.When it comes to traditional real estate investing, the recent housing crash of 2008 certainly had many investors looking for other means of growing their money. In addition to the rises and fall of the housing market there are also the risks involved in purchasing a home that needs to be fixed up or for cash flow properties the headache of finding good tenants. However, there is a type of investment that does not require you to get directly involved. It’s called a real estate investment trust or REIT.
What is an REIT? Basically, an REIT is a company that is charged with owning and operating income-producing or cash flow properties. Established in 1960, the REIT allows investors both small and large to get a piece of rental income from commercial properties.
A real estate investment trust does have many rules and regulations. One of the most important is that they must distribute at least 90% of their taxable income to all the shareholders every year in the form of dividends. It is little wonder that the REIT is a very popular form of real estate investing.
For an REIT to be formed, it must pass certain qualifications such as one hundred minimum shareholders, structured as a business trust or corporation, fully transferable shares, run by trustees or directors, 90% taxable income, and have at least 75% percent of it’s holdings in real estate.
In addition, the REIT needs to be split fairly between shareholders with five or less being unable to hold 50% or more of the total number of shares.
REIT Stock Fund
There are numerous advantages which is why they are so popular. However, some of the most important include the following.
Outstanding Yields: Arguably the main reason REIT is so popular is that the dividend yields for 15 year investments average 8% which is quite impressive when compared to the S&P 500 Index. In addition, there is inherent stability in REIT dividends thanks to stable rents and conservative leverage on the balance sheet itself.
Simple Taxes: The taxes for a real estate investment trust are fairly straightforward as they use the 1099-DIV form which breaks down the investment. So, the dividends are separated by standard income, capital gains and the return of capital. There are no taxes paid at the corporate level and investors are simply taxed at the individual rate.
Diversify: You can reduce the risk to your portfolio by adding REIT since they have little to no correlation to the S&P 500. This means that you are protecting your future income in case the worst should happen on the stock market.
Easily Liquidate: You can purchase shares of REIT on the stock exchange easily when compared to trying to buy or sell property. When you consider the ease of effort, it’s little wonder that real estate investment trust shares are definitely preferred by many investors.
All in all, the real estate investment trust is one of the safest and easiest ways to invest your money while receiving strong dividends each year.
For more info about real estate, visit our sister site, STL Real Estate