With everything feeling like it’s up in the air, everyone is scrambling to find the best way to secure their retirement funds in this rapidly changing economy. One option that people have been turning to is that of real estate investment trusts, or REITs. If you’re wondering if REITs are worth looking into, we’ve put together this guide going over the benefits and drawbacks of this platform and how you can start investing. For investment services near you, trust your local financial advisors at Maggi Tax Tampa!
Your Brief Introduction to REITs
A closer look at REITs reveals real estate companies that manage various aspects of producing income through properties. When you invest in a REIT, you are putting your hand in a pool of income produced by these companies without you needing to expend any effort yourself. This method is popular because you can receive your share even if you don’t actively purchase or manage the properties involved.
Now that you know the basics, we’ll introduce you to the different types of REITs that you could be investing in:
Mortgage REITs
As the name suggests, mortgage REITs focus primarily on connecting with property owners and managers through mortgages and loans. The income generated from REITs comes from the interest associated with these loans and is subject to change with rising or decreasing interest rates.
Equity REITs
Like how mortgage REITs are dependent on the interest from loans and mortgages, equity REITs are based on equity. Rather than selling properties, income is earned through rent charges.
Hybrid REITs
For those who want to capitalize on both types of methods, hybrid REITs allow you to earn income through both mortgages and equity. Hybrid REITs are a bit more rare and harder to come by, making them a little less practical for some investors.
A Few Other Things You Should Know About REITs:
● They are traded on an active platform just like liquid stocks.
● There may be high eligibility requirements.
● They have little capital appreciation, unlikely to lead to large gains.
● They encompass more properties than just residential homes including retail stores, warehouses, medical facilities, administrative offices, and more.
Want to Invest? Here’s How to Get Started:
There are a couple of ways to access the realm of REITs: through public and private platforms.
Public REITs are traded through an open platform that anybody can use just like a public exchange for stocks. REITs can be traded by individual investors as a liquid investment, or you can purchase REITs that aren’t to be traded as fluidly. Once you invest in a non-traded REIT, it keeps its market value.
Private REITs are only available to those with connections among institutional investors. Because they aren’t officially registered like REITs on public platforms, private REITs are more susceptible to fraudulent activity. While this isn’t necessarily a “bad” type of investment, it’s best to tread with caution.
Bottom Line: Is It Worth It?
With so many types of REITs and ways to trade them, it’s no wonder potential investors have a difficult time navigating the scene just to see if it’s a viable source of income for their retirement. While we suggest you come in for a consultation, you can take a look at the pros and cons to help you get a better idea:
Pros
● Traded as a liquid asset
● Offers stable income
● Flexible in ways to invest
● Safer public platforms
Cons
● Less chance of higher returns
● Subject to tax
● Private platforms vulnerable to fraud
Navigate Your Options, Reach Out to Your Trusted Financial Advisors at Maggi Tax!
Your trusted financial advisors at Maggi Tax are extremely knowledgeable in all types of investment opportunities, including real estate investment trusts! Call (727) 799-1701 today to schedule a consultation to see if REITs are a viable option for you.
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