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  - Introduction to Investing - Starting - Five Questions to Ask Before You Invest
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  Real Estate Investment Trusts (REITs)
  
  What are REITs?
  
  Realty investment trusts (" REITs") allow people to buy large-scale, income-producing property. A REIT is a company that owns and generally operates income-producing realty or related properties. These may include office structures, going shopping malls, houses, hotels, resorts, self-storage facilities, storage facilities, and mortgages or loans. Unlike other property companies, a REIT does not establish realty residential or commercial properties to resell them. Instead, a REIT buys and establishes residential or commercial properties mainly to operate them as part of its own financial investment portfolio.
  
  Why would somebody buy REITs?
  
  REITs provide a method for individual financiers to make a share of the earnings produced through business real estate ownership - without actually needing to go out and buy business realty.
  
  What types of REITs exist?
  
  Many REITs are signed up with the SEC and are openly traded on a stock exchange. These are called openly traded REITs. Others might be registered with the SEC however are not publicly traded. These are called non- traded REITs (also understood as non-exchange traded REITs). This is one of the most crucial distinctions among the various sort of REITs. Before purchasing a REIT, you ought to comprehend whether it is publicly traded, and how this could impact the advantages and risks to you.
  
  What are the benefits and dangers of REITs?
  
  REITs use a method to consist of realty in one's financial investment portfolio. Additionally, some REITs might offer higher dividend yields than some other investments.
  
  But there are some threats, especially with non-exchange traded REITs. Because they do not trade on a stock market, non-traded REITs include special risks:
  
  Lack of Liquidity: Non-traded REITs are illiquid financial investments. They normally can not be offered easily on the open market. If you need to offer a possession to raise money rapidly, you may not have the ability to do so with shares of a non-traded REIT. Share Value Transparency: While the market cost of an openly traded REIT is readily accessible, it can be tough to identify the value of a share of a non-traded REIT. Non-traded REITs normally do not supply a quote of their worth per share until 18 months after their offering closes. This may be years after you have actually made your financial investment. As an outcome, for a significant period you might be not able to examine the worth of your non-traded REIT financial investment and its volatility. Distributions May Be Paid from Offering Proceeds and Borrowings: Investors might be drawn in to non-traded REITs by their relatively high dividend yields compared to those of openly traded REITs. Unlike openly traded REITs, however, non-traded REITs regularly pay distributions in excess of their funds from operations. To do so, they may utilize offering profits and borrowings. This practice, which is generally not utilized by openly traded REITs, minimizes the value of the shares and the cash readily available to the business to purchase extra properties. Conflicts of Interest: Non-traded REITs usually have an external supervisor instead of their own employees. This can cause potential disputes of interests with shareholders. For example, the REIT may pay the external manager significant charges based upon the quantity of residential or commercial property acquisitions and properties under management. These cost incentives may not always line up with the interests of shareholders.
  
  How to purchase and offer REITs
  
  You can purchase a publicly traded REIT, which is listed on a significant stock exchange, by purchasing shares through a broker. You can buy shares of a non-traded REIT through a broker that takes part in the non-traded REIT's offering. You can likewise purchase shares in a REIT shared fund or REIT exchange-traded fund.
  
  Understanding fees and taxes
  
  Publicly traded REITs can be bought through a broker. Generally, you can acquire the typical stock, preferred stock, or financial obligation security of an openly traded REIT. Brokerage fees will use.
  
  Non-traded REITs are usually sold by a broker or monetary adviser. Non-traded REITs typically have high up-front fees. Sales commissions and upfront offering charges usually total approximately 9 to 10 percent of the investment. These costs lower the worth of the financial investment by a significant amount.
  
  Special Tax Considerations
  
  Most REITS pay out at least one hundred percent of their taxable income to their investors. The investors of a REIT are responsible for paying taxes on the dividends and any capital gains they get in connection with their investment in the REIT. Dividends paid by REITs normally are treated as ordinary income and are not entitled to the decreased tax rates on other types of corporate dividends. Consider consulting your tax adviser before buying REITs.
  
  Avoiding fraud
  
  Be careful of anybody who tries to offer REITs that are not registered with the SEC.
  
  You can verify the registration of both openly traded and non-traded REITs through the SEC's EDGAR system. You can also use EDGAR to review a REIT's annual and quarterly reports as well as any offering prospectus. For more on how to utilize EDGAR, please see Research Public Companies.
  
  You need to also take a look at the broker or financial investment advisor who suggests acquiring a REIT. To discover how to do so, please check out Working with Brokers and Investment Advisers.
  
  Additional info
  
  SEC Investor Bulletin: Real Estate Investment Trusts (REITs)
  
  FINRA Investor Alert: Public Non-Traded REITs - Perform a Careful Review Before Investing
  
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