(480) 433-6036 raycutler@ubgre.com
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Real estate investment trusts or REITs are an alternative to investing in stocks, bonds, and mutual funds while offering stability and decent returns. Below are some of the pros and cons to REITs.
The Pros:
  • When you invest in REITs, you are able to make money off real estate without being a landlord or dealing with a property management company, actually, the managers of the REITs work directly for the stockholders.
  • You can diversify your portfolio by adding REIT, which focus on residential or commercial properties, as well as obtaining specific REITs like upscale apartment builders, commercial real estate, affordable housing builders or retail.
  • Investing in a targeted or specialized real estate investment trust allows you to avoid the risk of targeted investment funds. A targeted investment fund such a medical mutual fund invests in assumptions like drug price spending or medical devices, while a medical real estate investment trust rents out facilities to whichever medical provider may need an office space.
  • REITs are a more liquid than physical real estate, you can sell your shares within days rather than weeks, while not withstanding a loss.
  • If the REIT has a dividend reinvestment plan, you can save on fees.

The Cons:

  • REITs have a lower return, while they pay 90% of their earnings in dividends to stockholders, the average yield is only 6% when compared to mutual funds averaging 10%.
  • Income from REITs is taxable to the recipient while the REIT itself has many tax advantages when compared to investing in al real estate the investor receives fewer tax breaks investing with the REIT.
  • REIT make money based on the rates of retail, commercial, residential. and industry space, leaving them tied to the real estate trends of the area.
  • Buying multiple REITs that invest in the same type of real estate does not add diversity to your portfolio.
  • The stability of the REIT depends on the customer base, while apartments see lease turnovers every 12 to 24 months, commercial or office properties see leases as long as 10 years.
There are many pros and cons to every type of investment from stocks to real estate. If you are ready to diversify your portfolio or just have a few questions contact me I am ready to help you start the process or answer any questions you may have.