Real Estate Investment Trusts or REIT's Demystified

A REIT or real estate investment is a security or mutual fund that is traded on the open market, similar to an action, but receives special tax considerations. There are three types of REITs: Equity REITs, Mortgage REITs and hybrid REITs. These securities invests in real estate directly, either through properties or purchasing mortgages. Things a REIT are generally invest in shopping malls, office buildings, apartments, warehouses, hotels, timber, infrastructure, storage, etc.

Investing in a REIT has several advantages over the need to invest in real estate directly yourself. For example, if you decide to buy an income property or commercial, you have to manage the lease, tenants, property, risk, maintenance, etc. In fact, through the purchase of a property directly, money invested is not in liquid form. Although not as liquid or not, I mean if you decide that you need the money tomorrow, probably can not sell the property and collect the money tomorrow. An alternative to this is to invest in a Fund. A REIT is very liquid where you can sell your shares and receive the money tomorrow. In fact, a REIT may be considered as an intermediary that manages all leases, tenants, property, risk, maintenance, etc.

Benefits of a REIT is that security itself receives special tax considerations. To be classified as a REIT, security must distribute at least 90% of its annual taxable income to its shareholders. For this reason, you will see that REITs generally offer ridiculously high dividend payments, 10% +. In fact, many REITs offer a dividend reinvestment plan if the dividends paid to you automatically reinvest in security / background. The reason for a REIT to distribute at least 90% of their taxable income because it allows security to deduct dividends paid to shareholders of the tax base of the company, usually resulting in corporate tax and / or the state paid for security. (Essentially the elimination of double taxation of other denominations if 100% is paid). The money received by the shareholders are then taxed at the rate of dividends and capital gains.

There are three main types of REITs that can be seen on the open market. The three types are equity REITs, mortgage REITs and hybrid REITs.

A REIT equity is one in which security invests and owns properties in which the value is in the "fairness" of the property. The REIT then collect the rent as a source of income.

A real estate investment company that normally manages real estate mortgage loans, such as lending money to real estate owners, real estate or buy existing securities backed by mortgages. The source of income for mortgage REITs is the interest charged for borrowing money.

A hybrid REIT is exactly what it sounds like, a mixture of equity and mortgage REITs. Basically, the investment in both properties and mortgages.

Conclusion: A REIT can be a very good investment option that pay high dividends each year. If you are looking for securities or funds that act as extra income, a REIT may be right for you. Part of the REIT, I personally invested in the following: NLY (Annaly Capital Management) AGNC (American Capital Agency Group), CGMRX (CGM Realty) MTGE (American Capital Mortgage Investment Corp.).