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  - Introduction to Investing - Getting Started - Five Questions to Ask Before You Invest
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  Real Estate Investment Trusts (REITs)
  
  What are REITs?
  
  Realty financial investment trusts (" REITs") allow people to purchase large-scale, income-producing realty. A REIT is a business that owns and normally realty or associated assets. These may include office complex, shopping malls, houses, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans. Unlike other realty companies, a REIT does not establish realty residential or commercial properties to resell them. Instead, a REIT purchases and establishes residential or commercial properties mostly to operate them as part of its own financial investment portfolio.
  
  Why would someone invest in REITs?
  
  REITs offer a method for specific investors to earn a share of the earnings produced through business realty ownership - without in fact having to go out and buy commercial genuine estate.
  
  What kinds of REITs exist?
  
  Many REITs are signed up with the SEC and are openly traded on a stock exchange. These are referred to as openly traded REITs. Others might be signed up with the SEC but are not publicly traded. These are referred to as non- traded REITs (also called non-exchange traded REITs). This is one of the most important distinctions among the different type of REITs. Before buying a REIT, you ought to comprehend whether or not it is publicly traded, and how this might affect the advantages and dangers to you.
  
  What are the benefits and threats of REITs?
  
  REITs use a method to consist of realty in one's investment portfolio. Additionally, some REITs might offer higher dividend yields than some other financial investments.
  
  But there are some risks, specifically with non-exchange traded REITs. Because they do not trade on a stock exchange, non-traded REITs include unique threats:
  
  Lack of Liquidity: Non-traded REITs are illiquid investments. They usually can not be sold easily on the free market. If you require to offer an asset to raise money rapidly, you may not be able to do so with shares of a non-traded REIT. Share Value Transparency: While the market cost of an openly traded REIT is readily available, it can be difficult to figure out the value of a share of a non-traded REIT. Non-traded REITs normally do not provide a quote of their value per share till 18 months after their offering closes. This may be years after you have actually made your investment. As a result, for a considerable time duration you might be unable to evaluate the value of your non-traded REIT investment and its volatility. Distributions May Be Paid from Offering Proceeds and Borrowings: Investors may be drawn in to non-traded REITs by their fairly high dividend yields compared to those of publicly traded REITs. Unlike publicly traded REITs, however, non-traded REITs often pay distributions in excess of their funds from operations. To do so, they may utilize providing profits and loanings. This practice, which is normally not used by publicly traded REITs, decreases the worth of the shares and the cash available to the business to buy additional possessions. Conflicts of Interest: Non-traded REITs generally have an external supervisor rather of their own staff members. This can result in prospective conflicts of interests with investors. For example, the REIT might pay the external manager significant costs based on the amount of residential or commercial property acquisitions and possessions under management. These cost rewards might not necessarily align with the interests of shareholders.
  
  How to purchase and offer REITs
  
  You can buy an openly traded REIT, which is listed on a major stock exchange, by purchasing shares through a broker. You can buy 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 mutual fund or REIT exchange-traded fund.
  
  Understanding charges and taxes
  
  Publicly traded REITs can be acquired through a broker. Generally, you can buy the typical stock, preferred stock, or financial obligation security of a publicly traded REIT. Brokerage fees will use.
  
  Non-traded REITs are generally offered by a broker or financial adviser. Non-traded REITs typically have high up-front costs. Sales commissions and upfront offering costs usually amount to around 9 to 10 percent of the investment. These costs lower the worth of the investment by a significant quantity.
  
  Special Tax Considerations
  
  Most REITS pay out a minimum of one hundred percent of their taxable earnings to their shareholders. The investors of a REIT are accountable for paying taxes on the dividends and any capital gains they get in connection with their investment in the REIT. Dividends paid by REITs typically are treated as ordinary income and are not entitled to the decreased tax rates on other kinds of business dividends. Consider consulting your tax adviser before buying REITs.
  
  Avoiding fraud
  
  Be cautious of anyone who tries to offer REITs that are not signed up with the SEC.
  
  You can verify the registration of both openly traded and non-traded REITs through the SEC's EDGAR system. You can also utilize EDGAR to examine a REIT's annual and quarterly reports in addition to any offering prospectus. For more on how to utilize EDGAR, please visit Research Public Companies.
  
  You should likewise take a look at the broker or investment adviser who advises buying a REIT. To find out how to do so, please check out Working with Brokers and Investment Advisers.
  
  Additional details
  
  SEC Investor Bulletin: Real Estate Investment Trusts (REITs)
  
  FINRA Investor Alert: Public Non-Traded REITs - Perform a Careful Review Before Investing
  
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