REITs, or real estate investment trusts, are companies that own or finance income-producing real estate in a variety of real estate sectors. These real estate companies have to meet a number of requirements to qualify as REITs. Most REITs are listed on major stock exchanges and offer a number of advantages to investors. Real estate investment trusts ("REITs") allow individuals to invest in large-scale, income-producing real estate.
A REIT is a company that owns and typically operates income-producing real estate or related assets. These may include office buildings, shopping centres, flats, hotels, resorts, self-storage facilities, warehouses and mortgages or loans. Unlike other real estate companies, a REIT does not develop real estate for resale. Instead, a REIT purchases and develops properties primarily to operate them as part of its own investment portfolio.
A company must distribute at least 90 per cent of its taxable income to its shareholders each year to qualify as a REIT. Most REITs distribute 100 per cent of their taxable income. To maintain its status as a pass-through entity, a REIT deducts these dividends from its corporate taxable income. A pass-through entity does not have to pay federal or state corporate income tax, but shifts the responsibility for paying these taxes to its shareholders.
However, REITs cannot pass on tax losses to investors. This is especially true if you are considering investing in unlisted REITs, as you will not be able to easily access your money until the REIT is listed or liquidates its assets. In many cases, this can take about 10 years to happen. However, when it comes to 401(k) plans, it will depend on what is available through your company's plan.
Many companies only allow you to invest in a target date fund through your 401(k) plan. But you can always contact your company's benefits team for clarification on whether or not you have the option to invest in REITs through your 401(k) plan. However, investing in other types of real estate, such as healthcare or retail, which have longer lease structures and are therefore much less cyclical, is an excellent way to protect against a downturn. The best known, though not necessarily the best, investments are Fannie Mae and Freddie Mac, government-sponsored enterprises that buy mortgages in the secondary market.
From the 1880s through the 1930s, a similar provision existed that allowed investors to avoid double taxation - paying taxes at both the corporate and individual level - because trusts were not taxed at the corporate level if the income was distributed to the beneficiaries. If remuneration is based on the value of the REIT's assets, management usually focuses on investing in additional properties for capital appreciation. REITs invest in a wide range of real estate types, such as offices, apartment buildings, warehouses, shopping centres, medical facilities, data centres, mobile phone towers, infrastructure and hotels. To invest in them, you would have to work with a financial advisor or broker to arrange your investment.
Instead, they have private sponsors who market them to investors, often those who have been burned elsewhere in the market and are looking for relative stability. Many REITs are listed on major stock exchanges, and investors can buy and sell them like stocks throughout the session. This means positioning their properties to attract tenants and earn rental income and managing their property portfolios and buying and selling assets to create value over long-term real estate cycles. Investors own REITs through their retirement savings and other investment funds, according to Nareit, a Washington, D.
C., firm. Equity REITs are considered superior for long-term investing because they earn dividends from rental income as well as capital gains from property sales. In a poor economy, retail REITs with large cash positions will have the opportunity to buy good real estate at distressed prices. In addition, at least 75 per cent of their income must come from certain real estate sources (the 75 per cent income test), including rents from real estate, gains from the sale or other disposition of real estate, and income and gains from the foreclosure of real estate.
Since these investments can be bought and sold on major stock exchanges, REIT investors enjoy liquidity, i.e. the ability to quickly convert an investment into cash. The goal of this association is to promote the REIT industry by ensuring that the interests of its members are advanced through unparalleled advocacy, investor outreach, continuing education and networking. Rocket Mortgage, LLC, Rocket Homes Real Estate LLC, RockLoans Marketplace LLC (under the name Rocket Loans) and Rocket Auto LLC are independent operating subsidiaries of Rocket Companies, Inc.