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  - Introduction to Investing - Getting Started - Five Questions to Ask Before You Invest
• Understanding Fees
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  1. Home.
• Introduction to Investing.
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  - Save and Invest - Define Your Goals.
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  Real Estate Investment Trusts (REITs)
  
  What are REITs?
  
  Property investment trusts (" REITs") allow individuals to buy large-scale, income-producing real estate. A REIT is a company that owns and typically operates income-producing real estate or related properties. These might include office complex, going shopping malls, houses, hotels, resorts, self-storage centers, warehouses, and mortgages or loans. Unlike other realty business, a REIT does not develop property residential or commercial properties to resell them. Instead, a REIT buys and develops residential or commercial properties mainly to operate them as part of its own investment portfolio.
  
  Why would somebody invest in REITs?
  
  REITs supply a method for private investors to make a share of the earnings produced through commercial real estate ownership - without really having to go out and buy industrial real estate.
  
  What types of REITs are there?
  
  Many REITs are registered with the SEC and are publicly traded on a stock exchange. These are understood as openly traded REITs. Others might be signed up with the SEC but are not publicly traded. These are called non- traded REITs (likewise understood as non-exchange traded REITs). This is among the most crucial differences amongst the numerous kinds of REITs. Before buying a REIT, you should understand whether it is openly traded, and how this might affect the advantages and risks to you.
  
  What are the advantages and risks of REITs?
  
  REITs offer a way to consist of real estate in one's investment portfolio. Additionally, some REITs might offer greater dividend yields than some other financial investments.
  
  But there are some risks, particularly with non-exchange traded REITs. Because they do not trade on a stock market, non-traded REITs include unique threats:
  
  Lack of Liquidity: Non-traded REITs are illiquid investments. They usually can not be sold easily on the open market. If you need to offer a property to raise money quickly, you may not be able to do so with shares of a non-traded REIT. Share Value Transparency: While the market price of an openly traded REIT is easily available, it can be hard to figure out the worth of a share of a non-traded REIT. Non-traded REITs usually do not offer a price quote of their value per share until 18 months after their offering closes. This might be years after you have actually made your financial investment. As a result, for a considerable period you might be unable to evaluate the worth of your non-traded REIT financial investment and its volatility. Distributions May Be Paid from Offering Proceeds and Borrowings: Investors may be brought in to non-traded REITs by their fairly high dividend yields compared to those of openly traded REITs. Unlike publicly traded REITs, nevertheless, non-traded REITs frequently pay distributions in excess of their funds from operations. To do so, they may use providing profits and loanings. This practice, which is normally not utilized by openly traded REITs, reduces the value of the shares and the cash available to the business to purchase additional properties. Conflicts of Interest: Non-traded REITs usually have an external manager rather of their own workers. This can lead to prospective conflicts of interests with shareholders. For instance, the REIT may pay the external manager significant charges based upon the quantity of residential or commercial property acquisitions and properties under management. These fee incentives might not necessarily line up with the interests of shareholders.
  
  How to purchase and offer REITs
  
  You can buy an openly traded REIT, which is noted on a major stock market, by purchasing shares through a broker. You can purchase shares of a non-traded REIT through a broker that gets involved in the non-traded REIT's offering. You can likewise purchase shares in a REIT shared fund or REIT exchange-traded fund.
  
  Understanding fees and taxes
  
  Publicly traded REITs can be purchased through a broker. Generally, you can acquire the typical stock, chosen stock, or debt security of an openly traded REIT. Brokerage charges will apply.
  
  Non-traded REITs are typically offered by a broker or financial advisor. Non-traded REITs typically have high up-front charges. Sales commissions and upfront offering costs generally total roughly 9 to 10 percent of the financial investment. These expenses lower the value of the investment by a significant quantity.
  
  Special Tax Considerations
  
  Most REITS pay out a minimum of 100 percent of their gross income 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 financial investment in the REIT. Dividends paid by REITs generally are dealt with as common income and are not entitled to the lowered tax rates on other types of business dividends. Consider consulting your tax advisor before purchasing REITs.
  
  Avoiding fraud
  
  Be wary of anyone who attempts to sell REITs that are not registered with the SEC.
  
  You can confirm the registration of both openly traded and non-traded REITs through the SEC's EDGAR system. You can likewise utilize EDGAR to examine a REIT's yearly and quarterly reports in addition to any offering prospectus. For more on how to use EDGAR, please check out Research Public Companies.
  
  You should likewise examine out the broker or financial investment advisor who advises purchasing a REIT. To learn 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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