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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 investment trusts (" REITs") allow individuals to buy large-scale, income-producing genuine estate. A REIT is a company that owns and typically runs income-producing real estate or associated properties. These may include office complex, going shopping malls, apartment or condos, hotels, resorts, self-storage facilities, storage facilities, and mortgages or loans. Unlike other realty companies, a REIT does not develop realty residential or commercial properties to resell them. Instead, a REIT buys and establishes residential or commercial properties mostly to operate them as part of its own investment portfolio.
  
  Why would someone purchase REITs?
  
  REITs supply a way for private investors to earn a share of the income produced through commercial property ownership - without really having to go out and buy commercial realty.
  
  What types of REITs exist?
  
  Many REITs are registered with the SEC and are publicly traded on a stock market. These are referred to as openly traded REITs. Others may be registered with the SEC however are not publicly traded. These are understood as non- traded REITs (also referred to as non-exchange traded REITs). This is one of the most essential differences among the various type of REITs. Before purchasing a REIT, you should comprehend whether or not it is publicly traded, and how this could impact the benefits and risks to you.
  
  What are the advantages and dangers of REITs?
  
  REITs use a way to include property in one's financial investment portfolio. Additionally, some REITs might offer greater dividend yields than some other financial investments.
  
  But there are some threats, particularly with non-exchange traded REITs. Because they do not trade on a stock exchange, non-traded REITs include special dangers:
  
  Lack of Liquidity: Non-traded REITs are illiquid financial investments. They usually can not be sold easily on the open market. If you need to offer a possession to raise money quickly, you might not be able to do so with shares of a non-traded REIT. Share Value Transparency: While the marketplace cost of an openly traded REIT is readily available, it can be difficult to identify the worth of a share of a non-traded REIT. Non-traded REITs normally do not provide a price quote of their value per share until 18 months after their offering closes. This may be years after you have actually made your financial investment. As an outcome, for a substantial period you may be unable to assess the worth of your non-traded REIT investment and its volatility. Distributions May Be Paid from Offering Proceeds and Borrowings: Investors might be brought in to non-traded REITs by their relatively high dividend yields compared to those of publicly traded REITs. Unlike openly traded REITs, nevertheless, non-traded REITs regularly pay distributions in excess of their funds from operations. To do so, they might use offering profits and borrowings. This practice, which is usually not utilized by publicly traded REITs, reduces the worth of the shares and the money readily available to the business to acquire extra properties. Conflicts of Interest: Non-traded REITs generally have an external supervisor instead of their own staff members. This can cause potential disputes of interests with shareholders. For instance, the REIT may pay the external manager considerable costs based upon the amount of residential or commercial property acquisitions and properties under management. These charge rewards might not necessarily line up with the interests of shareholders.
  
  How to buy and offer REITs
  
  You can invest in a publicly traded REIT, which is noted on a major stock exchange, by acquiring shares through a broker. You can acquire shares of a REIT through a broker that takes part in the non-traded REIT's offering. You can also purchase shares in a REIT shared fund or REIT exchange-traded fund.
  
  Understanding fees 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 an openly traded REIT. Brokerage costs will apply.
  
  Non-traded REITs are usually sold by a broker or financial consultant. Non-traded REITs usually have high up-front costs. Sales commissions and in advance offering costs typically total approximately 9 to 10 percent of the financial investment. These costs lower the worth of the financial investment by a substantial quantity.
  
  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 generally are treated as normal earnings and are not entitled to the lowered tax rates on other types of business dividends. Consider consulting your tax advisor before buying REITs.
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  Avoiding scams
  
  Watch out for anyone who tries to offer REITs that are not registered with the SEC.
  
  You can validate the registration of both publicly traded and non-traded REITs through the SEC's EDGAR system. You can also use EDGAR to evaluate a REIT's annual and quarterly reports in addition to any offering prospectus. For more on how to use EDGAR, please check out Research Public Companies.
  
  You should also take a look at the broker or financial investment adviser who suggests acquiring a REIT. To discover how to do so, please see Dealing with Brokers and Investment Advisers.
  
  Additional info
  
  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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