REITs are investment vehicles that generate income for their investors. Real estate investment trusts (REITs) own and operate various real estate properties in which 90% of income is paid as dividends to shareholders.REITs are classified as publicly traded and non-traded. REITs can offer investors a steady income, but a REജIT comes with risks commonly associated with other investments.

How REITs Work

Since REITs return at least 90% of their 澳洲幸运5官方开奖结果体彩网:taxable income to 澳洲幸运5官方开奖结果体彩网:shareholders, they usually offer a higher yield than the market. REITs pay their shareholders through 澳洲幸运5官方开奖结果体彩网:dividends, and cash payments from corporations to their investors. According to the S&P Global Market Intelligence, 74 publicly-traded REITs in the U.S. increased dividend payouts in 2023.

REITs allow investors to earn dividend-based income from properties while not owning any of the properties.They may specialize in a certain real estate sector or offer more diverse holdings. REITs can hold various properties, including:

• Apartment complexes
• Healthcare facilities
• Hotels
• Office buildings
• Self-storage facilities
• Retail centers, such as malls

Risks of Non-Traded REITs

Non-traded REITs or non-exchange traded ♋REITs do not trade on a stock exchange, which opens up investors to s𓄧pecial risks such as:

• Share Value: Non-traded REITs are not publicly traded, meaning investors cannot research investments. As a result, it's difficult to determine the REIT's value.
• Lack of Liquidity: Non-traded REITs are also illiquid, which means there may not be buyers or sellers in the market available when an investor wants to transact. In many cases, non-traded REITs can't be sold for at least 10 years.
• Distributions: Non-traded REITs pool money to buy and manage properties, which locks in investor money. However, pooled money is sometimes paid out as dividends from another investor's money—as opposed to income that a property has generated. This process limits 澳洲幸运5官方开奖结果体彩网:cash flow for the REIT and diminishes the value of shares.
• Fees: Most REITs charge an upfront fee between 9% and 10%. Non-traded REITs can also have external manager fees and investors should request 澳洲幸运5官方开奖结果体彩网:transparency. If a non-traded REIT pays an external manager, that expense reduces investor returns.

Risks of Publicly Traded REITs

Publicly traded REITs offer investors a way to add real estate to an investment portfol❀io or retirement account and earn an attractive dividend. Publicly traded REITs allow for more transparency b🌳ut still come with risks like:

• Interest Rates: A rise in interest rates may reduce demand for REITs, as investors choose other vehicles like 澳洲幸运5官方开奖结果体彩网:U.S. Treasuries that are government-guaranteed, and pay a fixed interest rate. However, some argue that rising rates indicate a strong economy, leading to higher rents and 澳洲幸运5官方开奖结果体彩网:occupancy rates, and better-performing REITs.
• Choosing the Wrong Sector: As online shopping increases and suburban malls decline, REITs with this exposure may be a risky investment. With 澳洲幸运5官方开奖结果体彩网:Millennials preferring urban living for convenience and cost-saving purposes, urban shopping centers could be a better play.
• Taxes: REIT dividends are taxed as 澳洲幸运5官方开奖结果体彩网:ordinary income, so the investor must evaluate their tax bracket alongside income generated from a REIT. The ordinary income tax rate is the same as an investor's income tax rate, which is likely higher than dividend tax rates or capital gains taxes for stocks.

The Bottom Line

Investing in REITs can be a passive, income-producing alternative to buying property directly. However, investors shouldn't be swayed by large dividend payments alone. REITs come with risks and investors should research management teams and properties based on current trends, and whether the REIT is publicly traded or non-traded.