Real Estate Stock - About REITs (Real Estate Investment Trusts)

Real estate stock is a sound investment in assets with tangible value. If you pride yourself on being an up and coming investor, you should make sure you know all of the investing options that are available to you.

While most people are familiar with stocks and bonds, they may not be aware of other investment options such as the various real estate stocks. REITs are Real Estate Investment Trusts. Essentially this is a company that purchases properties and then becomes a real estate management firm.

Anyone can get involved in these investments by purchasing shares of the companies who make the purchases and manage the assets. Essentially, they will allow a certain number of investors to be a part of the trust (it is usually a limited number for each trust).

So where did REITs come from? Well the REIT was born in 1960 by congress. Before this time only those with major money were able to get into real estate investing. Everyone else had to play the regular stock market. So, they wanted to give smaller investors the chance to get in on the profit making market of real estate stock. With REITs instead of having to come up with the money to purchase a property, an investor can get in to the market by purchasing shares.

When choosing a REIT, it is important to realize that there are a variety of REIT styles. Usually a REIT sticks with one type of property. For example, there are commercial REITs that only deal with commercial real estate and ventures. They may purchase office space and rent it out to businesses. Another option is industrial real estate, purchasing and maintaining industrial parks. There are also residential buildings that vary from apartment buildings to condominiums and even complete housing neighborhoods that are owned and operated by the REIT. If you know more about one kind of real estate than another, you may prefer to fund this style of REIT where you can invest in something you undersand.

Understanding how REIT investments work is vital if you are considering going into this type of investment market. Here are some of the basics.

First, if a REIT makes money, its investors are going to make money. As a REIT earns taxable income, at least 90 percent must be paid directly to the investors. So, as a shareholder, as long as the REIT is making money, you are too!

When it comes to shareholders REITs run the gamut from small to massive, but even the small ones are not so small that they can't have any buying power. A REIT must have at least 100 shareholders.

When it comes to operations, REITs have a few major rules to follow. First, they are required to invest 75% or more of the money put into the trust in real estate ventures. Additionally, they have to be getting at least 75% of their income from monies made from the properties they own (i.e. through mortgage interest or rent)

If you are considering investing in REITs it is important to note that they are also a little different in tax structure. Since so much of the profit from a REIT is going to the shareholders, they are able to deduct that money from their taxable income. However, when you as in investor get your dividends you will be responsible for paying the capital gains taxes.

Before you invest, learn more. REITBuyer.com is not only a full service REIT broker, but also has research and educational information to help you get started and build your portfolio.