Created by Congress in 1960, Real Estate Investment Trust’s (REIT’s) enable average investors to make investments in a portfolio of real estate. Congress recognized that one way for those investors to take advantage of real estate investment’s was to pool their capital and create a single economic enterprise. A REIT is simply a company that combines the capital of many investors to own or provide financing or real estate. Investors purchase shares in the company.
- REIT’s must pay at least 90% of their taxable income to shareholders in the form of distributions annually. (usually paid out monthly)
- REIT’s are a portfolio of properties managed by experienced professionals.
- REIT’s do not pay corporate taxes on distributions, thereby avoiding double taxation
- REIT’s attract a broad range of investors including individuals, pension funds, endowment funds and foundations, insurance companies, bank trust departments, and mutual funds.
An Attractive Investment:
- For investors seeking yield and long term growth.
- To invest in and receive regular, stable cash dividends
- To participate in one of the fastest growing segments of the economy
- Greater diversification within your portfolio
-Investment in real estate sector
-Potential tax advantages on a portion of distributions
-The cost savings of a self managed REIT
Investor Profile for investors seeking the potential for:
- Long-Term Capital gain
- Inflation Hedge
- Low Correlation to the stock market
- Total return
- Diversification
The main objective’s of a REIT.
- To acquire quality properties that generates sustainable growth in cash flows from operations to pay regular cash distributions
- To preserve, protect and return your capital contributions
- To realize growth in the value of our investments upon our ultimate sale of such investment.
- To be prudent, patient, and deliberate taking into account the current real estate market and trends.
Investment considerations:
- Professional Management: Benefit from management by institutional real estate professionals.
- Distribution income and growth: Distributions may grow over time primarily through rental increases specified in the lease
- Diversification: Can further diversify a portfolio, potentially decreasing risk and increasing return.
- Hedge against inflation: Real estate investments have historically proved to be a good inflation hedge.
- Distribution reinvestment program: Distribution’s can be reinvested in additional shares at a 5% discount.
- Share Repurchase program: Share repurchases program available, though investment in REIT’s should be considered a long term investment.
- Automatic Purchase Plan: Allows periodic purchases of additional shares without additional paperwork.
- Purchase in qualified accounts: may be purchased in IRA’s, 401(k)’s, pensions, and other qualified retirement accounts.
