Simple and Safe Real Estate Investing; An Overview of the REIT

When considering investment opportunities, many individuals turn to their financial consultant and purchase mutual funds, stocks and bonds. With the economy and stock markets in an ever changing pattern, most financial consultants would agree that investing in a Real Estate Investment Trust, in lieu of pooling into a real estate partnership, is a viable financial investment option without the complication of actual home ownership and avoids the red tape associated with real estate partnership agreements.  Understanding the dynamics of an REIT and the advantages and the disadvantages of this investment vehicle will ensure you have diversified your portfolio and obtained the appropriate real estate purchases based on your specific needs.

Real Estate Investment Trusts, REIT, are listed on the stock exchange and make for a very liquid investment. With most brokerage firms requesting no minimum investment the advantage over real estate properties is in the guarantee of losses never being passed to the investor. Additionally, income and property taxes only apply in states where the investor resides unlike actual real estate ownership or real estate partnerships which require property taxes to be paid in the state in which the property is located. This, alone, provides an incentive to move into REIT plans with properties in states where taxes are more significant than in the state you may actually reside.

With an REIT, monies are deposited into a mutual fund account with shares purchased in the REIT program of your choosing. As an REIT is required to distribute 90% of its taxable income to shareholders, most REIT plans are publicly held and traded on the stock market. In contrast to an REIT, a real estate partnership is not publicly traded on the stock market and will routinely pass investment losses to the investors.  By doing so, most investors find they may see red in their investment portfolio and may also be required to meet future contribution requirements through their real estate partnership agreement.