Investing Advice

Real Estate Investment Trusts (REIT)

A reit invests in real estate, mortgages, or both. Such real estate may include shopping centers, apartment buildings, office complexes, hotels, warehouses, retirement homes, golf courses, or retirement communities. Some, called mortgage reits, donít hold real estate but lend money to developers. Reits are required to immediately pass on to investors 90% of income, after expenses.

If you are drawn to investing in reits, a mutual fund is the only safe way to do it. An individual reit is not always successful. A recession can bring about high vacancy rates, resulting in severe losses. In 1998 and 1999, with no recession as an excuse, most of the 187 reits lost money. The average one made 5.6% in 2001.

The big advantage of reits over other real estate investments is liquidity. When you want to cash out, you do it through your broker just like you would do with any other stock, and buy more shares any time you like.

Equity REITS

In theory, these will go on forever. The best buys are usually in older, long-established reits whose underlying value may be much greater than the share price.

Finite-life REITS

These have a specified life of 10 to 15 years, when the properties will be sold and the profit distributed to the shareholders. These are similar to real estate syndicates and limited partnerships, all of which offer you the benefits of owning real estate, but without the burden of managing the property and the potential liabilities of an owner.

Other Types of Investments Topics:

  1. Interesting Ways to Invest in Real Estate
  2. Real Estate Investment Trusts (REIT)
  3. Bonds
  4. Bond Ratings
  5. Closed-end Bond Funds

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