Friday, February 27, 2009

Purchase Shares of REITs - Real Estate Investment Trusts

Are REITs a Good Investment?

We hear this question a lot. Part of the reason we're hearing it may be because of the tough patch the economy has had lately. Another part of the problem may be because people are just not sure of what they are and why they should buy into them. Here's a quick look at both of these topics.

What is a REIT? A REIT is a real estate investment trust. This is essentially a fund that supports real estate construction or real estate management. Basically, if you purchase shares in a REIT, that money will go into a pot that will be used to buy, build, manage and maintain real estate investments.

How do you make money? Once you have purchased a share in a REIT, at least 90 percent of the profits that are made by that REIT go right back into the hands of the investors in the form of dividends. Think of this as stock market dividends but getting a higher percentage back from profits than you ever would with other stocks, bonds and mutual funds.

Why should you buy in to a REIT? This answer is simple. Real estate is considered the strong steady market. Even when the rest of the market is crumbling, it usually keeps a pretty good foothold on things. Part of the reason for this is that real estate is an asset, and a tangible one. While values may fluctuate, property always is worth something.

For example, many real estate investment trusts have seen returns of 6-60 percent, which is as good if not better than stocks and other investing funds. So, if you know when and where to buy, there is a chance to make a lot of money.

But what about the bad economy? This is a question a lot of people are asking. They are worried that if they get into purchasing REITs now they are going to lose more money if the market tumbles again. While that could happen, the chances are that even if there were another downturn, your investment would still be pretty stable. Remember, you are still working with a tangible investment of property.

It is also interesting to know that REITs are interesting enough to get the attention of some of the major private firms such as Tishman Speyer Properties. This shows not just small investors are interested in this type of investing.

Getting into the REIT market is not that difficult. It takes little more than some time to get yourself acclimated and then learn about what it is you want to buy before you make a purchase. Start by logging onto The site is chock full of all the information you need to learn about REITs and study the past performance of many REITs as well as get a good idea of the future possibilities. Once you are ready to buy, they are also a full service investing real estate broker that can complete that transaction in the same place.

No Worries About the Stock Market When You buy REITs

About REITs: Real Estate Investment Trusts

Real Estate Investment Trusts (REITs) were created in the 1960s so that all investors would have access to income-producing real estate through the purchase and sale of liquid securities. Before REITs were created access to investment returns of commercial real estate equity was only available to institutions and wealthy individuals.

For over half a century, REITs have become an important part of the US economy and investment markets. US REITs have grown from $90 billion to over $300 billion in the past decade and they have gained popularity all over the world.

During their early years, mortgage REITs dominated the industry, providing debt financing for commercial or residential properties through investments in mortgages and mortgage-backed securities. Interest in equity REITs which own and manage commercial properties was limited because of the requirements that ownership and management of assets remain separate. This restriction was lifted with the passage of the Tax Reform Act of 1986 which allowed REITs to both own and manage properties. Now, more than 90% of publicly traded US REiTs are equity REITs that own and manage commercial real estate. Most of their income is derived from rents owned by companies across the nation.

There are certain guidelines in place that must be followed in order for a company to qualify as a REIT in the US. The internal Revenue Code requires at least 75% of total assets be invested in real estate which realize at least 75% of its gross income from rents from real property or interest from mortgages. They must also distribute at least 90% of taxable income to shareholders annually in the form of dividends.