How to Own Commercial Property With Investment Trusts

List: Posted: 03/28/11

Do you want to collect dividends in a new way or invest in hotels? If so, real estate investment trusts may be for you.

 

Also known as REITs, these trusts are bought and sold just like stocks. You can buy a REIT that focuses on a certain kind of building – like hotels – or you can buy a REIT by region. No matter which kind of investment trusts you opt for, you’ll be investing in commercial real estate in a unique way. You can own your very own part of huge buildings with this group investment method.

A REIT distributes dividends, and in order to qualify as a REIT, the trust must dispense ninety percent of its income as dividends to shareholders. Despite the Great Recession, some investment trusts managed to perform very well and increase the dividends paid to shareholders. The number one performing REIT of the past decade was Federal Realty Investment Trust, which invests in retail real estate on the eastern seaboard and in California.

Investment trusts are diversified, which means your portfolio isn’t bogged down by one piece of commercial property. Rather, a REIT includes several buildings, such as many self-storage facilities, not just one particular facility. The rent that is paid gets passed on to you in the form of dividends.

Because real estate investment trusts are exempt from paying federal taxes, the savings gets passed on to you in the form of profits. This is just one of the many advantages to investing in a REIT.

 

While you will have to ultimately pay taxes on your dividends, the dividends from investment trusts are easy income for you.

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