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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 financial investment trusts (" REITs") permit individuals to buy large-scale, income-producing genuine estate. A REIT is a company that owns and typically runs income-producing property or associated assets. These may consist of office structures, going shopping malls, apartments, hotels, resorts, self-storage centers, warehouses, and mortgages or loans. Unlike other realty business, a REIT does not establish property 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 investment portfolio.
  
  Why would somebody invest in REITs?
  
  REITs offer a method for specific financiers to make a share of the earnings produced through industrial real estate ownership - without in fact having to go out and purchase business realty.
  
  What kinds of REITs exist?
  
  Many REITs are registered with the SEC and are openly traded on a stock exchange. These are understood as openly traded REITs. Others may be registered with the SEC however are not publicly traded. These are known as non- traded REITs (likewise understood as non-exchange traded REITs). This is one of the most important differences amongst the numerous sort of REITs. Before purchasing a REIT, you must understand whether or not it is openly traded, and how this might affect the advantages and threats to you.
  
  What are the benefits and dangers of REITs?
  
  REITs provide a way to consist of realty in one's investment portfolio. Additionally, some REITs might provide higher dividend yields than some other financial investments.
  
  But there are some dangers, particularly with non-exchange traded REITs. Because they do not trade on a stock exchange, non-traded REITs include unique dangers:
  
  Lack of Liquidity: Non-traded REITs are illiquid financial investments. They usually can not be offered readily on the open market. If you require to sell a property to raise money rapidly, you might 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 easily available, it can be hard to figure out the worth of a share of a non-traded REIT. Non-traded REITs usually do not supply a price quote of their worth per share up until 18 months after their offering closes. This may be years after you have made your financial investment. As a result, for a significant period you might be not able to evaluate the value of your non-traded REIT financial investment and its volatility. Distributions May Be Paid from Offering Proceeds and Borrowings: Investors might be brought in to non-traded REITs by their relatively high dividend yields compared to those of openly traded REITs. Unlike publicly traded REITs, however, non-traded REITs regularly pay circulations in excess of their funds from operations. To do so, they might utilize offering profits and borrowings. This practice, which is generally not used by publicly traded REITs, reduces the value of the shares and the cash readily available to the business to purchase extra properties. Conflicts of Interest: Non-traded REITs typically have an external manager rather of their own staff members. This can result in potential conflicts of interests with shareholders. For example, the REIT may pay the external manager considerable charges based on the quantity of residential or commercial property acquisitions and properties under management. These cost incentives might not always align with the interests of investors.
  
  How to purchase and sell REITs
  
  You can purchase an openly traded REIT, which is listed on a major stock exchange, by buying shares through a broker. You can acquire shares of a non-traded REIT through a broker that gets involved in the non-traded REIT's offering. You can likewise purchase shares in a REIT mutual fund or REIT exchange-traded fund.
  
  Understanding charges and taxes
  
  Publicly traded REITs can be acquired through a broker. Generally, you can buy the common stock, preferred stock, or financial obligation security of a publicly traded REIT. will apply.
  
  Non-traded REITs are usually offered by a broker or monetary adviser. Non-traded REITs typically have high up-front costs. Sales commissions and upfront offering charges generally total approximately 9 to 10 percent of the financial investment. These expenses lower the worth of the financial investment by a considerable amount.
  
  Special Tax Considerations
  
  Most REITS pay out a minimum of 100 percent of their taxable earnings to their shareholders. The shareholders of a REIT are responsible for paying taxes on the dividends and any capital gains they receive in connection with their financial investment in the REIT. Dividends paid by REITs generally are treated as normal income and are not entitled to the minimized tax rates on other kinds of business dividends. Consider consulting your tax advisor before purchasing REITs.
  
  Avoiding scams
  
  Be wary of anybody who attempts to offer REITs that are not signed up with the SEC.
  
  You can validate the registration of both publicly traded and non-traded REITs through the SEC's EDGAR system. You can likewise use EDGAR to review a REIT's annual and quarterly reports along with any offering prospectus. For more on how to use EDGAR, please see Research Public Companies.
  
  You ought to likewise examine out the broker or financial investment consultant who suggests buying a REIT. To find out how to do so, please visit Working with Brokers and Investment Advisers.
  
  Additional information
  
  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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