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  - Introduction to Investing - Getting Going - Five Questions to Ask Before You Invest
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  Real Estate Investment Trusts (REITs)
  
  What are REITs?
  
  Real estate investment trusts (” REITs”) permit people to invest in massive, income-producing realty. A REIT is a business that owns and usually runs income-producing realty or related properties. These might include workplace buildings, going shopping malls, homes, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans. Unlike other realty companies, a REIT does not develop property residential or commercial properties to resell them. Instead, a REIT purchases and establishes residential or commercial properties primarily to run them as part of its own investment portfolio.
  
  Why would someone invest in REITs?
  
  REITs offer a method for private investors to make a share of the income produced through business property ownership - without really having to go out and purchase industrial genuine estate.
  
  What types of REITs exist?
  
  Many REITs are signed up with the SEC and are publicly traded on a stock market. These are understood as openly traded REITs. Others may be signed up with the SEC however are not publicly traded. These are called non- traded REITs (also referred to as non-exchange traded REITs). This is among the most important differences amongst the various kinds of REITs. Before purchasing a REIT, you ought to understand whether or not it is publicly traded, and how this could impact the benefits and risks to you.
  
  What are the benefits and risks of REITs?
  
  REITs provide a way to consist of realty in one’s investment portfolio. Additionally, some REITs may provide higher dividend yields than some other investments.
  
  But there are some threats, specifically with non-exchange traded REITs. Because they do not trade on a stock market, non-traded REITs involve unique dangers:
  
  Lack of Liquidity: Non-traded REITs are illiquid investments. They typically can not be sold easily on the free market. If you require to sell a possession to raise money rapidly, you might not be able to do so with shares of a non-traded REIT. Share Value Transparency: While the market rate of an openly traded REIT is easily accessible, it can be tough to figure out the worth of a share of a non-traded REIT. Non-traded REITs generally do not provide a price quote of their worth per share until 18 months after their offering closes. This may be years after you have actually made your investment. As an outcome, for a substantial period you may be unable to examine the worth of your non-traded REIT investment and its volatility. Distributions May Be Paid from Offering Proceeds and Borrowings: Investors may be brought in to non-traded REITs by their fairly high dividend yields compared to those of openly traded REITs. Unlike openly traded REITs, however, non-traded REITs frequently pay distributions in excess of their funds from operations. To do so, they may utilize offering earnings and loanings. This practice, which is usually not used by openly traded REITs, minimizes the worth of the shares and the money readily available to the business to purchase extra properties. Conflicts of Interest: Non-traded REITs normally have an external supervisor rather of their own employees. This can cause possible disputes of interests with shareholders. For instance, the REIT might pay the external supervisor considerable charges based upon the quantity of residential or commercial property acquisitions and possessions under management. These fee incentives may not necessarily align with the interests of shareholders.
  
  How to buy and offer REITs
  
  You can invest in a publicly traded REIT, which is noted on a significant stock exchange, by buying 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 mutual fund or REIT exchange-traded fund.
  
  Understanding costs and taxes
  
  Publicly traded REITs can be purchased through a broker. Generally, you can acquire the common stock, preferred stock, or debt security of a publicly traded REIT. Brokerage fees will use.
  
  Non-traded REITs are typically sold by a broker or monetary adviser. Non-traded REITs generally have high up-front costs. Sales commissions and in advance offering costs typically total roughly 9 to 10 percent of the financial investment. These costs lower the worth of the investment by a considerable amount.
  
  Special Tax Considerations
  
  Most REITS pay out a minimum of one hundred percent of their gross income to their investors. The shareholders of a REIT are accountable 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 dealt with as normal income and are not entitled to the reduced tax rates on other kinds of corporate dividends. Consider consulting your tax adviser before investing in REITs.
  
  Avoiding scams
  
  Be careful of anyone who tries to sell REITs that are not registered with the SEC.
  
  You can confirm the registration of both publicly traded and non-traded REITs through the SEC’s EDGAR system. You can likewise use EDGAR to examine a REIT’s annual and quarterly reports as well as any offering prospectus. For more on how to use EDGAR, please go to Research Public Companies.
  
  You must also have a look at the broker or investment advisor who buying a REIT. To learn how to do so, please see Dealing 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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