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  - Introduction to Investing - Starting - Five Questions to Ask Before You Invest
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  Real Estate Investment Trusts (REITs)
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  What are REITs?
  
  Realty investment trusts (" REITs") enable individuals to buy large-scale, income-producing property. A REIT is a business that owns and generally operates income-producing realty or associated properties. These might include office complex, shopping malls, apartment or condos, hotels, resorts, self-storage facilities, storage facilities, and mortgages or loans. Unlike other property companies, a REIT does not develop real estate residential or commercial properties to resell them. Instead, a REIT buys and establishes residential or commercial properties primarily to run them as part of its own financial investment portfolio.
  
  Why would someone invest in REITs?
  
  REITs provide a way for specific financiers to earn a share of the income produced through industrial realty ownership - without actually needing to go out and purchase business property.
  
  What types of REITs exist?
  
  Many REITs are registered with the SEC and are publicly traded on a stock market. These are known as openly traded REITs. Others might be registered with the SEC but are not openly traded. These are known as non- traded REITs (likewise known as non-exchange traded REITs). This is among the most essential differences among the various kinds of REITs. Before purchasing a REIT, you should comprehend whether or not it is openly traded, and how this might affect the advantages and risks to you.
  
  What are the advantages and dangers of REITs?
  
  REITs offer a method to include realty in one's investment portfolio. Additionally, some REITs may offer greater 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 special risks:
  
  Lack of Liquidity: Non-traded REITs are illiquid financial investments. They usually can not be sold readily on the open market. If you require to sell an asset to raise cash rapidly, you may not be able to do so with shares of a non-traded REIT. Share Value Transparency: While the market cost of a publicly traded REIT is easily accessible, it can be tough to identify the worth of a share of a non-traded REIT. Non-traded REITs normally do not provide an estimate of their value per share till 18 months after their offering closes. This may be years after you have actually made your investment. As an outcome, for a considerable time duration you might be not able to examine the value 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 relatively high dividend yields compared to those of publicly traded REITs. Unlike openly traded REITs, nevertheless, non-traded REITs regularly pay circulations in excess of their funds from operations. To do so, they might utilize providing proceeds and borrowings. This practice, which is usually not utilized by publicly traded REITs, lowers the value of the shares and the money readily available to the business to acquire extra assets. Conflicts of Interest: Non-traded REITs typically have an external manager rather of their own employees. This can result in potential disputes of interests with shareholders. For instance, the REIT may pay the external supervisor significant fees based on the amount of residential or commercial property acquisitions and possessions under management. These charge rewards may not always align with the interests of investors.
  
  How to purchase and offer REITs
  
  You can invest in an openly traded REIT, which is noted on a significant stock market, by purchasing shares through a broker. You can acquire shares of a through a broker that gets involved in the non-traded REIT's offering. You can likewise purchase shares in a REIT shared fund or REIT exchange-traded fund.
  
  Understanding costs and taxes
  
  Publicly traded REITs can be acquired through a broker. Generally, you can acquire the common stock, preferred stock, or debt security of a publicly traded REIT. Brokerage charges will apply.
  
  Non-traded REITs are usually offered by a broker or financial adviser. Non-traded REITs generally have high up-front fees. Sales commissions and in advance offering fees normally amount to roughly 9 to 10 percent of the investment. These expenses lower the value of the financial investment by a significant amount.
  
  Special Tax Considerations
  
  Most REITS pay a minimum of one hundred percent of their taxable earnings to their shareholders. The investors of a REIT are accountable for paying taxes on the dividends and any capital gains they get in connection with their investment in the REIT. Dividends paid by REITs typically are dealt with as regular earnings and are not entitled to the decreased tax rates on other types of corporate dividends. Consider consulting your tax adviser before investing in REITs.
  
  Avoiding scams
  
  Be wary of anyone who tries to sell REITs that are not signed up with the SEC.
  
  You can validate the registration of both openly traded and non-traded REITs through the SEC's EDGAR system. You can likewise utilize EDGAR to evaluate a REIT's annual and quarterly reports in addition to any offering prospectus. For more on how to use EDGAR, please see Research Public Companies.
  
  You need to likewise examine out the broker or financial investment adviser who recommends acquiring a REIT. To learn how to do so, please see Dealing 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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