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  - Introduction to Investing - Starting - Five Questions to Ask Before You Invest
• Understanding Fees
• Asset Allocation
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  1. Home.
• Introduction to Investing.
• Investment Products
  
  Main navigation
  
  - Save and Invest - Define Your Goals.
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• Understand What It Means to Invest
  
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  - How to Submit Comments to the SEC.
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  Real Estate Investment Trusts (REITs)
  
  What are REITs?
  
  Realty investment trusts (" REITs") enable individuals to invest in massive, income-producing property. A REIT is a company that owns and usually runs income-producing property or related possessions. These may consist of office complex, shopping malls, apartment or condos, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans. Unlike other real estate companies, a REIT does not establish 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 buy REITs?
  
  REITs provide a way for individual investors to make a share of the earnings produced through commercial property ownership - without actually needing to go out and buy industrial genuine estate.
  
  What kinds of REITs exist?
  
  Many REITs are registered with the SEC and are openly traded on a stock exchange. These are called publicly traded REITs. Others might be registered with the SEC but are not publicly traded. These are called non- traded REITs (also understood as non-exchange traded REITs). This is one of the most essential differences amongst the different kinds of REITs. Before buying a REIT, you should comprehend whether or not it is publicly traded, and how this might affect the advantages and dangers to you.
  
  What are the benefits and risks of REITs?
  
  REITs use a way to consist of realty in one's investment portfolio. Additionally, some REITs might provide higher dividend yields than some other financial investments.
  
  But there are some threats, specifically 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 typically can not be sold easily on the free market. If you require to offer an asset to raise money rapidly, you might not be able to do so with shares of a non-traded REIT. Share Value Transparency: While the marketplace cost of an openly traded REIT is readily accessible, it can be hard to figure out the value of a share of a non-traded REIT. Non-traded REITs typically do not provide a quote of their worth per share till 18 months after their offering closes. This might be years after you have actually made your investment. As an outcome, for a considerable time duration you may be unable to examine the value 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 fairly high dividend yields compared to those of publicly traded REITs. Unlike openly traded REITs, however, non-traded REITs often pay circulations in excess of their funds from operations. To do so, they may use providing proceeds and loanings. This practice, which is generally not utilized by publicly traded REITs, reduces the worth of the shares and the money readily available to the business to acquire additional possessions. Conflicts of Interest: Non-traded REITs usually have an external manager instead of their own workers. This can cause possible conflicts of interests with shareholders. For example, the REIT might pay the external manager significant fees based upon the quantity of residential or commercial property acquisitions and possessions under management. These cost rewards might not always line up with the interests of investors.
  
  How to purchase and offer REITs
  
  You can buy a publicly traded REIT, which is noted on a significant stock exchange, by purchasing shares through a broker. You can purchase shares of a non-traded REIT through a broker that takes part in the non-traded REIT's offering. You can also buy shares in a REIT shared fund or REIT exchange-traded fund.
  
  Understanding fees and taxes
  
  Publicly traded REITs can be purchased through a broker. Generally, you can buy the typical stock, preferred stock, or debt security of an openly traded REIT. Brokerage fees will apply.
  
  Non-traded REITs are normally offered by a broker or financial consultant. Non-traded REITs normally have high up-front fees. Sales commissions and in advance offering fees normally total around 9 to 10 percent of the financial investment. These costs lower the worth of the investment by a considerable quantity.
  
  Special Tax Considerations
  
  Most REITS pay out at least 100 percent of their gross income to their investors. The investors 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 regular income and are not entitled to the reduced tax rates on other types of business dividends. Consider consulting your tax adviser before investing in REITs.
  
  Avoiding fraud
  
  Watch out for anybody who attempts to sell REITs that are not registered with the SEC.
  
  You can validate the registration of both publicly traded and non-traded REITs through the SEC's EDGAR system. You can likewise utilize EDGAR to evaluate a REIT's yearly and quarterly reports along with any offering prospectus. For more on how to use EDGAR, please visit Research Public Companies.
  
  You ought to also have a look at the broker or financial investment adviser who recommends acquiring a REIT. To discover how to do so, please check out Working with Brokers and Investment Advisers.
  
  Additional information
  
  SEC Investor Bulletin: Real Estate Investment Trusts (REITs)
  
  Alert: Public Non-Traded REITs - Perform a Careful Review Before Investing
  
  Featured Content
  
  School's Out, Investing for Your Future Remains in!
  
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