How REITS can help you.
- Since REITs are required to pay out 90% of taxable income, REIT dividend payouts are often higher than those on the S&P 500
- By investing in commercial real estate through a REIT, investors can diversify their portfolio without having to purchase physical property
- A major advantage of REITs is their liquidity, as they can be purchased and sold online easily
- REITs help to reduce portfolio risk by mitigating individual stock and bond volatility.
- Since REITs are regulated and publicly traded, investors can obtain comprehensive financial information before investing.
- Investing in REITs can also provide you with a tax break; Dividends from REIT investments are taxed at a lower rate than most other income sources.
- Last but not least, REITs are more resilient to market fluctuations since their value is directly tied to real estate.
Real estate investment trusts also have their drawbacks.
- It is important for investors to be aware of the potential tax liability associated with REITs, since their dividends are generally not qualified and are taxed at a higher rate. Furthermore, the 20% pass-through deduction does apply to REITs, but distributions may still be subject to tax.
- Since rising interest rates raise competition within the real estate market, they can negatively affect REIT prices.
- A variety of different real estate investments come with different risks; hotel REITS, for instance, tend to suffer from lower demand and occupancy rates in economic downturns.
These considerations must be taken into account when investing in real estate investments such as REITs, as they could impact returns significantly. Therefore, investors should do their research and understand all the potential risks before making an investment decision.
