How to invest in REITs (Real Estate Investment Trust)

This article will show you how to invest in REITs and how they are constructed. Real Estate Investment Trusts are securities that invest in real estate and are sold like stocks. REITs either invest in real estate through properties or through mortgages. One reason corporations issue REITs is because of their special tax considerations in the form of reduction of corporate income taxes. In addition, REITs are a good investment for a diversified portfolio because they offer investors high yields,
Instructions
1.
If you do not already have a financial advisor or financial planner, go online and research how to open a brokerage account. Talk to your local financial advisor from companies such as Ameriprise Financial, Merrill Lynch, Wells Fargo, etc.
2
Now you want to understand how Real Estate Investment Trusts work. The next few steps will help you understand how REITs work and what to look for when choosing a REIT to put in your portfolio.
3
There are three different types of REITs: mortgage REITs, equity REITs, and hybrid REITs. Equity REITs invest primarily in ownership of properties, and gain their revenues from property rent. Mortgage REITs primarily invest in ownership of property mortgages and loan money for mortgages to owners of real estate. They also may purchase existing mortgages, and their revenues are from the interest earned on these mortgages. Hybrid REITs, simply put, are a combination of the two previously mentioned investments.
4
REITs are required by law to distribute 90% of their income to the investors.
5
REITs may offer a DRIP plan which is a dividend reinvestment plan. This enables the dividends to be directly reinvested back into the trust.
6
REITs can be either privately or publicly held. Public REITs are listed on public stock exchanges just like common stock would be listed.
7
Now that you understand how REITs work, you want to ask for a prospectus from your favorite REIT companies.
8
After carefully reading the prospectus and investment objectives, talk to you broker or financial advisor to invest in the REIT.


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