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  - Introduction to Investing - Beginning - Five Questions to Ask Before You Invest
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  Real Estate Investment Trusts (REITs)
  
  What are REITs?
  
  Real estate financial investment trusts (" REITs") allow individuals to buy large-scale, income-producing property. A REIT is a company that owns and usually operates income-producing realty or related properties. These might include workplace buildings, going shopping malls, houses, hotels, resorts, self-storage centers, storage facilities, and mortgages or loans. Unlike other genuine estate companies, a REIT does not establish realty residential or commercial properties to resell them. Instead, a REIT purchases and develops residential or commercial properties primarily to operate them as part of its own investment portfolio.
  
  Why would someone invest in REITs?
  
  REITs supply a method for individual investors to earn a share of the earnings produced through industrial realty ownership - without really having to go out and purchase commercial property.
  
  What kinds of REITs are there?
  
  Many REITs are signed up with the SEC and are openly traded on a stock market. These are known as openly traded REITs. Others might be signed up with the SEC but are not openly traded. These are referred to as non- traded REITs (also referred to as non-exchange traded REITs). This is one of the most crucial differences amongst the different sort of REITs. Before purchasing a REIT, you need to understand whether it is openly traded, and how this might impact the advantages and risks to you.
  
  What are the benefits and threats of REITs?
  
  REITs provide a method to include property in one's investment portfolio. Additionally, some REITs may use higher dividend yields than some other investments.
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  But there are some risks, especially with non-exchange traded REITs. Because they do not trade on a stock market, non-traded REITs involve special threats:
  
  Lack of Liquidity: Non-traded REITs are illiquid investments. They usually can not be readily on the open market. If you require to offer an asset to raise cash rapidly, you may not be able to do so with shares of a non-traded REIT. Share Value Transparency: While the marketplace cost of a publicly traded REIT is readily available, it can be difficult to determine the value of a share of a non-traded REIT. Non-traded REITs generally do not offer an estimate of their worth per share up until 18 months after their offering closes. This may be years after you have made your investment. As a result, for a significant time period you might be not able to examine 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 openly traded REITs, nevertheless, non-traded REITs regularly pay distributions in excess of their funds from operations. To do so, they may utilize offering earnings and borrowings. This practice, which is generally not utilized by openly traded REITs, decreases the value of the shares and the money available to the business to buy additional assets. Conflicts of Interest: Non-traded REITs generally have an external supervisor instead of their own employees. This can result in possible conflicts of interests with investors. For example, the REIT may pay the external supervisor substantial charges based upon the quantity of residential or commercial property acquisitions and assets under management. These cost incentives may not always align with the interests of shareholders.
  
  How to purchase and offer REITs
  
  You can buy an openly traded REIT, which is noted on a significant stock market, by acquiring shares through a broker. You can acquire shares of a non-traded REIT through a broker that takes part in the non-traded REIT's offering. You can likewise acquire 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 purchase the typical stock, preferred stock, or financial obligation security of an openly traded REIT. Brokerage costs will apply.
  
  Non-traded REITs are typically sold by a broker or monetary advisor. Non-traded REITs generally have high up-front costs. Sales commissions and upfront offering costs typically total around 9 to 10 percent of the financial investment. These costs lower the value of the investment by a significant amount.
  
  Special Tax Considerations
  
  Most REITS pay at least one hundred percent of their gross income to their investors. The shareholders of a REIT are responsible for paying taxes on the dividends and any capital gains they receive in connection with their financial investment in the REIT. Dividends paid by REITs usually are treated as common earnings and are not entitled to the reduced tax rates on other kinds of business dividends. Consider consulting your tax adviser before purchasing REITs.
  
  Avoiding fraud
  
  Watch out for any person who attempts to sell REITs that are not registered with the SEC.
  
  You can validate the registration of both openly traded and non-traded REITs through the SEC's EDGAR system. You can also utilize EDGAR to review a REIT's annual and quarterly reports along with any offering prospectus. For more on how to use EDGAR, please visit Research Public Companies.
  
  You ought to also have a look at the broker or investment consultant who advises buying a REIT. To learn how to do so, please check out Dealing with Brokers and Investment Advisers.
  
  Additional details
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  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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