REITs for Fun and High Incomes
Although we invest our money to make more money, let's face it -- it's better to make investments that are also fun and interesting. That's why I like Real Estate Investment Trusts,
With REITs, we're putting our money into providing people in Texas with decent apartments to live in, providing self-storage facilities for people who're moving or for our men and women in uniform, nursing homes for our senior citizens -- and shopping malls to spend our money in.
Because the REIT concept has worked so well in the United States, it's spread (and is still spreading) to many other countries. Through Exchange Traded Funds or mutual funds, you can buy shares in REITs throughout the world, from Canada to Singapore.
You too can own a shopping mall in Tokyo!
I believe that every investor with brains should own a lot of shares of Real Estate Investment Trust stocks.
If you don't yet, you are either chasing a "Big Score" or "ten-bagger" (lots of luck -- you'll need it), or you just need to learn more about these wonderful companies.
The best way to learn all you can about REITs -- after you finish reading this lens, check out the Number one REIT book -- INVESTING IN REITS by Ralph L. Block (3rd edition).
And don't forget to rank this lens -- just on the stars above.
Are REITs Still a Good Investment?
What are the prospects for REITs and commercial real estate in the wake of the subprime mortgage disaster . . .
The subprime mortgage crisis has hit the stock prices of equity Real Estate Investment Trusts very hard. Their current yields are the highest in many years. But money for real estate financing is now harder to find, and the economy is slowing.
Real Estate Investment Trusts Keep Your Portfolio Diversified
Greater Asset Allocation Through REITS Means Lower Volatility
The degree to which securities act independently is known as their correlation. If they have perfect correlation, they go up and down together. If one goes up while the other goes down, they have perfect negative correlation.
In practice, they sometimes go up together, sometimes go down together.
REITs historically have only a 20-30% correlation with the overall stock market.
A leading asset allocation leading expert, Ibbotson Associates, studied the role of REITs in asset allocation from 1974 to 2004, and determined that putting 20% of your portfolio into REITs (along with the usual T-Bills, stocks and bonds) would have increased your yield during that period from 10.9% to 11.6%, while decreasing your risk from 10.6% to 10.1%.
More money for less risk -- that's smart investing.
But the REIT story only gets better . . .
Real Estate Investment Trusts or REITs
Discover the benefits of investing in REITs
Basic but thorough information on REITs and the terminology you need to know and understand to analyze their financial status. Real Estate Investment Trusts use both common real estate terms and their own special financial vocabulary, because of their unique tax status.
Fetching RSS feed... please stand byREIT Property Depreciation Means More Money in Your Pocket
And You Never Have to Pay Taxes on 25 to 30% of Your Dividends From Real Estate Investment Trusts
But because one major expense of real estate is depreciation, and depreciation does not take cash out of a REIT's bank account, they wind up having more cash in the bank than net income.
Which many of them pay out to shareholders.
Historically, around 25% to 30% of REIT dividends have been created by taking the depreciation expense (as they're required to, by the way). According to the U.S. IRS, this is NOT taxable income. It's a return of capital.
Therefore, it reduces the cost basis of your REIT shares -- and you don't have to pay taxes on this amount until (and UNLESS) you sell those shares.
Bottom line -- if you never sell the shares, you never have to pay taxes on that income.
Making that REIT company's after tax, net yield even higher than it appears . . . higher than the after tax, net yield of dividends paid by non-REIT companies.
In addition, REIT managements generally are very expert within their specialties. If that invests in apartments buildings in the US Southwest, they know all about their neighborhoods and zoning requirements. You won't catch them trying to buy a shopping mall in Chicago.
This helps make them very successful within their areas of expertise, but does mean that when you own just one REIT, you're vulnerable to a business downturn in apartment buildings in the US Southwest.
Therefore, you should own at least six different REITs -- that are diversified by type and location.
For more information on REITs and other investments that pay you to own them -- check out my website at Income Investing Secrets to get rich or retire on.
And don't forget to rank this lens -- just on the stars above.
Then sign my Guestbook below. If your website, blog or lens relates to REITs or investing for income, please include a link to your site, lens or blog.
Another Great Income Investing Opportunity
Canadian Income Trusts
REITs are a terrific income investing opportunity, but not the only one. Check out my lens on Canadian income trusts.-
Canadian Income Trusts -- Super Income Investments
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Canadian income trusts may yet prove one of the best income investments of our time. This lens will help you learn about how you can increase your investment income using these Canadian royalty trusts or CanRoys. The best reference for Canadian trusts...
Links to More REIT Information
The more you learn about Real Estate Investment Trusts, the better an income investor you'll be.
- National Association of Real Estate Investment Trusts (NAREIT)
- Here you'll find a lot of good information on REITs. NAREIT is the industry trade organization for promoting Real Estate Investment Trusts as businesses and investments.
- Greenstreet Advisors
- Green Street Advisors is a leading REIT research firm.
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