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The importance of diversifying is indisputable, but how can you diversify, reduce the exposure in your investments without money? Well, REITs could de be a good option if you’re thinking of expanding to the real estate market without having to buy a property and deal with tenants, repairs, and the operation of the estate, all for an investment starting from $25.
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What is a REIT?
REIT stands for Real Estate Investment Trusts, and it is a company that owns, operates, or finances real estate that generate income. This investment was designed like mutual funds, which means that REITs organize the capital of numerous investors to invest it in real estate.
This makes it possible for individual investors to earn dividends from real estate investments—without having to buy, manage, or finance any properties themselves.[/vc_column_text][vc_empty_space height=”45px”][vc_column_text]
What do REITs invest in?
Most REITs specialize in a specific real estate sector. However, you can find all kinds of REITs, some more diversified and specialty REITs with different configurations.
Here are some of the Real Estate where you can invest in a REIT:[/vc_column_text][vc_empty_space height=”45px”][/vc_column][/vc_row][vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column width=”1/4″][service_table title=”Buildings” title_tag=”h3″ title_background_type=”background_color_type” icon=”fa-building-o” icon_size=”fa-3x” border=”yes” content_background_color=”#f5f5f5″ title_color=”#fff000″ title_background_color=”#494949″]
- Apartment Complexes
- Healthcare Facilities
- Office Buildings
- Retail Centers
- Warehouses
- Self-Storage
- Hotels
[/service_table][/vc_column][vc_column width=”1/4″][service_table title=”Telecom” title_tag=”h3″ title_background_type=”background_color_type” icon=”fa-skyatlas” icon_size=”fa-3x” border=”yes” title_color=”#fff000″ title_background_color=”#494949″ content_background_color=”#f5f5f5″]
- Fiber Cables
- Data Centers
- Energy Pipelines
- Cell Towers
[/service_table][/vc_column][vc_column width=”1/4″][service_table title=”Land” title_tag=”h3″ title_background_type=”background_color_type” icon=”fa-tree” icon_size=”fa-3x” border=”yes” title_color=”#fff000″ title_background_color=”#494949″ content_background_color=”#f5f5f5″]
- TimberLand
[/service_table][/vc_column][vc_column width=”1/4″][service_table title=”Infrastructure” title_tag=”h3″ title_background_type=”background_color_type” icon=”fa-train” icon_size=”fa-3x” border=”yes” title_background_color=”#494949″ title_color=”#fff000″ content_background_color=”#f5f5f5″]
- Highways
- Roads
- Bridges
- Sewages
- Energy
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How to invest in REITs?
You can invest in a publicly-traded REIT, which is listed on a major stock exchange (NYSE, NASDAQ, or others), by purchasing shares through a broker. You can purchase shares of a non-traded REIT through a broker that participates in the non-traded REIT’s offering. You can also purchase shares in a REIT mutual fund or REIT exchange-traded fund.[/vc_column_text][vc_empty_space height=”45px”][vc_single_image image=”1123″ img_size=”” qode_css_animation=””][vc_empty_space height=”45px”][/vc_column][/vc_row][vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern” css=”.vc_custom_1633561805947{background-color: #494949 !important;}” z_index=””][vc_column][vc_empty_space height=”25px”][vc_custom_heading text=”What about Taxes?” font_container=”tag:h2|text_align:left|color:%23fff000″ use_theme_fonts=”yes” css_animation=”fadeInDown”][vc_empty_space height=”45px”][vc_column_text]
You have to take into account that REITs are required to pay out 90% of taxable income to shareholders; thus REIT dividends are often much higher than the average stock on the S&P 500.
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How are taxes for the dividends of an ETF REIT?
The majority of the dividends obtained from EFT REITs will be taxed at your ordinary income tax rate after the 20% qualified business income deduction is applied to those distributions. In some cases, you might owe capital gains tax on some REIT ETF earnings, which will be noted on Form 1099-DIV.
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How are the taxes for the dividends obtained from mortgage REITs?
The dividends obtained from Mortgage REITs are also taxed at your ordinary income tax level. Most of the time, you’ll still qualify for the 20% qualified business income deduction, and you may also owe capital gains tax on a part of your earnings.
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How are REIT dividends taxed to foreign investors?
Foreign investors will typically be taxed at 30% for the dividends obtained from REITs, though many investors may qualify for reduced treaty agreements, lowering their taxation duties.[/unordered_list][vc_empty_space height=”45px”][vc_column_text]
SOURCES
- Nareit. “What’s a REIT (Real Estate Investment Trust)?” Accessed October 04, 2021.
- US Securities and Exchange Comission, “Real Estate Investment Trusts (REITs), Accessed October 06, 2021
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