Bob Wamhoff from Wamhoff Financial Planning and Accounting is here with more on Real Estate Investment Trusts or REIT's.
What is a REIT?
A fund that is typically focused on investing in a specific type of real estate, such as health care or multi-family properties
A specific REIT program is typically open to investors for a limited period of time, during which the fund accepts investable dollars to be used for the specific types of property that REIT is purchasing
A REIT will typically be put up for public buyout after a certain share price is achieved for the investors.
What are the advantages of a REIT
Investments are not dependent on the volatility of the stock market
Allows investors to truly diversify their portfolios. When folks think of diversification, they think of diversifying their funds within the market. In order to really diversify, you have to have investments in areas that are outside the market.
REIT`s typically produce a higher rate of return than bonds and CD`s.
It is still a good time to invest in real estate. Prices are still down from the peak, and many of the types of properties held in REIT`s are in high demand. The typical investor can`t go out and buy an apartment complex, for example. But by investing in a REIT, the average person can get in on that type of purchase.
REIT`s are buying properties in areas all over the country, so they tend to target markets and property types that have good potential for good return on the investments.
Investments can be made within an existing IRA so the growth on the funds is tax deferred.
What types of REIT`s are available-some examples include:
Multi-Family Housing ... in many markets, apartments are in high demand.
Major Retailer Anchored Strip Malls, these types of plazas have higher occupancy rates, which brings in steady rent income to the investors.
Health Care Facilities-there always a growing need for health care centers, so these specialty properties continue to bring demand.
How much money should you invest in a REIT?
In today's market, we're seeing investments of up to 30% of total net worth.
No more than 10% of total net worth in any one program.