REITs

  • REITs are companies set up for owning and managing real estate
  • Creates an opportunity for individual investors to invest in a real estate portfolio
  • Must pay out 90% of its taxable income to investors in the form of distributions
  • REITs are permitted to deduct distributions paid to shareholders from its taxable income, eliminating the “double taxation” that happens with most corporations whose earnings are taxed at the corporate level AND dividends at the shareholder level.

Traded vs. Nontraded REITs

The share prices for traded REITs are priced by the stock market, causing fluctuations in value. Shares can be purchased and sold any business day on a national exchange.

A Board of Directors sets the offering price of shares for non-traded REITs. The absence of a public market can mean very limited liquidity.

 

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