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  - Introduction to Investing - Starting - Five Questions to Ask Before You Invest
• Understanding Fees
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  Real Estate Investment Trusts (REITs)
  
  What are REITs?
  
  Real estate financial investment trusts (" REITs") allow individuals to buy large-scale, income-producing realty. A REIT is a business that owns and generally runs income-producing property or associated possessions. These might include office buildings, shopping malls, homes, hotels, resorts, self-storage centers, warehouses, and mortgages or loans. Unlike other property companies, a REIT does not establish property residential or commercial properties to resell them. Instead, a REIT purchases and develops residential or commercial properties primarily to run them as part of its own financial investment portfolio.
  
  Why would someone purchase REITs?
  
  REITs provide a way for specific investors to earn a share of the earnings produced through industrial real estate ownership - without really needing to go out and purchase industrial realty.
  
  What types of REITs are there?
  
  Many REITs are signed up with the SEC and are publicly traded on a stock exchange. These are referred to as openly traded REITs. Others might be signed up with the SEC but are not openly traded. These are called non- traded REITs (likewise called non-exchange traded REITs). This is one of the most important distinctions among the different sort of REITs. Before purchasing a REIT, you must comprehend whether it is openly traded, and how this might affect the advantages and dangers to you.
  
  What are the advantages and dangers of REITs?
  
  REITs provide a way to include realty in one's financial investment portfolio. Additionally, some REITs might use higher dividend yields than some other investments.
  
  But there are some threats, especially with non-exchange traded REITs. Because they do not trade on a stock exchange, non-traded REITs involve special threats:
  
  Lack of Liquidity: Non-traded REITs are illiquid investments. They typically can not be offered easily on the open market. If you require to offer an asset to raise cash rapidly, you might not have the ability 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 determine the worth of a share of a non-traded REIT. Non-traded REITs typically do not offer a price quote of their value per share until 18 months after their offering closes. This may be years after you have made your financial investment. As an outcome, for a substantial time duration you may be not able to evaluate the worth of your non-traded REIT financial investment and its volatility. Distributions May Be Paid from Offering Proceeds and Borrowings: Investors may be brought in to non-traded REITs by their reasonably high dividend yields compared to those of openly traded REITs. Unlike openly traded REITs, nevertheless, non-traded REITs frequently pay distributions in excess of their funds from operations. To do so, they may use offering profits and borrowings. This practice, which is typically not utilized by publicly traded REITs, reduces the worth of the shares and the money readily available to the company to purchase additional assets. Conflicts of Interest: Non-traded REITs normally have an external supervisor rather of their own employees. This can cause possible conflicts of interests with investors. For example, the REIT might pay the external manager substantial charges based on the amount of residential or commercial property acquisitions and possessions under management. These cost incentives might not always line up with the interests of investors.
  
  How to purchase and offer REITs
  
  You can purchase an openly traded REIT, which is listed on a major stock market, by acquiring 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 buy 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 purchase the common stock, chosen stock, or financial obligation security of a publicly traded REIT. Brokerage fees will apply.
  
  Non-traded REITs are generally sold by a broker or financial advisor. Non-traded REITs usually have high up-front fees. Sales commissions and in advance offering costs generally amount to approximately 9 to 10 percent of the financial investment. These costs lower the worth of the investment by a substantial amount.
  
  Special Tax Considerations
  
  Most REITS pay 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 get in connection with their financial investment in the REIT. Dividends paid by REITs typically are treated as normal earnings and are not entitled to the lowered tax rates on other kinds of business dividends. Consider consulting your tax advisor before buying REITs.
  
  Avoiding fraud
  
  Watch out for anyone who attempts to sell REITs that are not signed up with the SEC.
  
  You can confirm the registration of both openly 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 utilize EDGAR, please check out Research Public Companies.
  
  You ought to also inspect out the broker or financial investment adviser who recommends buying a REIT. To learn how to do so, please see 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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