When you were young do you remember hearing that the tried and true, or best investment in the long run, was real estate?  That he who owned the land owned all, made the rules, etc?  Perhaps now, many years later, you have had a house or two, possibly dabbled in income property, and realized it was really a lot of work.  Wouldn’t it be nice to be able to invest in property without the maintenance hassles, etc?  Well, of course there is an investment vehicle out there for you.  REITs, or Real Estate Investment Trusts are a means of investing in real property through an organized entity, but without the headache of managing the property yourself.  Not a typical investment vehicle, such as stocks and bonds, they often require special qualifications to purchase, and can have great risk associated with them.

During the last few years the real estate market across the country has taken a huge hit.  As you can imagine, as a rule,  REITs have suffered.  One nice thing about them is that in good years, you will likely profit.  REITs in the United States must distribute at least 90% of their taxable income every year to shareholders.  Wow, that sounds amazing, doesn’t it?  You are going to get your share of 90% of their taxed income.  Well, it is awfully easy to be a business owner, and not have very much taxable income.  If you reinvest all your money into putting more products on the shelf, and paying employees, for example, it is quite simple to not have much of an income profit.  However, successful companies don’t last long this way, nor do they get return investors.

The type of real estate in which REITs are invested can vary greatly as well.  Some buy forested land, as a hedge against future timber prices, while others may invest in such entities as malls, apartment buildings, entertainment centers or hospital buildings.  The property may be in a single state, or a series of states.  Many states have strict rules allowing what can and can’t be sold to its residents.  Since they must have more than 100 shareholders, they are almost like small investment clubs, and hence, often require that the money invested is not a significant portion of your total assets.  In other words, they are not investments entered into lightly.

Some have private offerings and some are publically traded.  For more information about REITs, you can go to www.reit.com or contact your investment advisor.  Remember, not all sayings are necessarily true; there are ways to make money without having to own tangible property.   REITs are just a tool that may allow you to explore another type of investment.