Are REITs Right for You? » Audio Archive » MoneyWise

Are REITs Right for You?


Christian talk radio with Rob West

May 2, 2022

Real estate can give you not only an income stream, but also appreciating value. Today, we look at a hands free way to invest in real estate through REITS (Real Estate Investment Trusts), which allow average investors to get in on significant real estate opportunities. There are two basic kinds of REITs: Equity (90%) and Mortgage (10%). Both are securities where the company owns and perhaps even operates real estate or related assets. They’re traded like stocks and are often listed on major market exchanges. REITs allow companies to buy real estate or mortgages using the combined assets of their investors. EquityREITS do better during periods of rising inflation because inflation generally causes the value of real estate to rise. However, higher interest rates arenotgood for REITS. Equity REITs earn revenue from the rent paid on the properties owned, which is then distributed to investors as dividends. Mortgage REITS don’t buy and manage property themselves. Instead, they lend money to other companies that then purchase and manage properties, or buy existing mortgages. Mortgage REITs mainly generate revenue from the interest they earn on their mortgage loans, which could be for commercial or residential projects. Some REITS, appropriately named Hybrids, have elements of both Equity and Mortgage REITs. So how do you invest in a REIT? The easiest way is with a publicly traded REIT that’s listed on a major stock exchange. Most IRAs and 401ks have options for investing in REITS. You can also buy shares of a non-traded REIT through a broker that participates in that particular REIT's offering. A third way is to purchase shares in a REIT mutual fund. Typically, the minimum requirement for REIT investment runs from $1, 000 to $25, 000. And there’s even one REIT, called FundRise that’s specifically designed for small investors. You can invest in it for as little as $500. If you’re looking to be a real estate investor without having to become a landlord, this could be the way to go. LISTENER QUESTIONS On today’s program, Rob also answers listener questions: I own several properties that I’d like to keep out of probate court when I die. Would it be wise to put my children on the deeds? We’re 20 years into a 30-year mortgage and would like to lower our interest rate. The lender proposed a new 30-year mortgage. Would that be a good idea? I’m about to retire and want to buy a truck. What’s my best option to pay for it? I’m 72 and have a 401k. I’d like to put that money in an IRA instead. How do I do that? You recommend 15% in a deferred compensation program. Would a private pension be part of this amount? What’s the best way to research mortgages and construction loans online? RESOURCES MENTIONED FundRise. com BankRate. com

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