Monday, March 23, 2009

"University Centre" - Look at The Good and Bad of Real Estate Investment Trusts -

Real Estate Investment Trusts, or REITs, are an avenue of investment that many people have heard of, but have not taken a good look into. Let's take that look now.

First, you need to understand what a REIT is. It is generally a property management investment. You fund a property management company and let them run a real estate asset, with you getting dividends from the profit. For example, a commercial real estate REIT may own a shopping center or strip mall. When you purchase shares of that REIT they are going into building and maintaining that structure. As tenants move in and rent those spaces, and the REIT profits, the profits come back to you in the form of dividends. This is also the case for residential real estate interests like housing developments, apartments and condominiums.

So now let's look at the good and bad sides of this investment option.

Dividends – Unlike other stocks and mutual funds, REITs come with some very strict rules for how their profits can be used. As profits come into a REIT, at least 90 percent of that profit must go right back to the shareholders in the form of dividends. That means most REITs always see a nice annual return on the initial investment, averaging 6% or more.

Their Own Entity – If you have noticed, the stock market has an all for one kind of approach to things. Often if one area of the market goes down, the rest follows, hitting you across the board. But REITs are their own creature. By not being as strongly tied to other investments and stock fluctuations, they can hold strong even when the rest of the market is on a roller coaster ride.

Solid Starting Platform – If you are not a major investor in general, REITs may be the way to go to begin your investment portfolio. For the most part they are strong and stable purchases and can bring in a good, steady profit for years to come.

Constant Investment – Since REITs revolve around property investments, there is always something tangible – a piece of land, homes, apartments or businesses. Usually these also have long-term leases, which means there will be money coming in from those leases to feed your dividends.


There aren't that many bad points to REITs, but here are a few:

Slow Growth - If you are looking for a major growth in your REIT, you likely won't see it. Since only 10% of the money made can be put back into the REIT (as 90% has to be paid out as a dividend) that means there is a lot less going back into the business to make it grow more quickly.

Down Times – Just like any other investment, there is always the chance that a downturn in real estate will make it where your REIT does not bring in a profit for the year.

Despite these few bad points, REITs are worth looking into. Start by going to a full service website like There you can get information about REITS, tools and research help as well as education and advice before you buy. When you're ready, they are also investment real estate brokers who can take care of the entire transaction.
Real Estate Investments to See Real Profits

Many investors say they want two things in their investments – a return on their money and some security that their money will not be here today and gone tomorrow. When it comes to trading on the stock market or purchasing mutual funds, those are usually two things that cannot be promised. When you purchase stocks, you never know if the company is going to have a bad quarter, losing you a chunk of your investment or if they are going to fail altogether, taking your money with them.

The only place you can really be sure that you will not lose everything in a bad session is in real estate.

Even if the bottom falls out of the real estate market, real estate that has been purchased is an asset. So, while there may be losses in a major downturn, you won't lose everything. Often in this case if you were to hold on for a little while and be patient it will all bounce back and you'll be seeing dividends come in again like nothing ever happened.

There are two ways to invest in real estate. The first is to make a real estate purchase. For the most part this means having a lot of money in hand to be able to buy a piece of property or a building outright. For most people this is not a possibility as this means having tens to hundreds of thousands of dollars in hand to invest.

There is another option however. Instead, why not be a part of a real estate investment trust or REIT. A REIT is where you are a shareholder in property ownership. This means you will purchase shares that go into a collective pot that is used to purchase and maintain properties. These properties could be anything from commercial buildings that are being leased out to residential buildings that are rented out.

The way a REIT works is that as the real estate management group makes a profit, that profit will be given to you as a dividend. Laws dictate that at least 90 percent of the profits from a REIT have to be returned to the shareholders, so barring a major downturn in the economy you know you will get a return on your investment year after year.

That other 10 percent of the profit from the REIT will go back into the management of the properties or possible improvement or expansions that will give you even more return on your investment dollar in the future.

Unlike regular real estate purchases, there is another benefit to REITs. If you ever needed to pull some of your money out it is as easy as selling a few shares instead of having to sell a property and go through all those hassles.

Getting into the REIT market is also relatively simple. Just go to and you can research the REITs out there and even make your purchases in one stop, as they are an investment real estate broker as well.