Three Ways To Invest In Apartments: Part Two

Real Estate Investment Trust

There are basically three ways to invest in apartments:

1) Do It Yourself

2) REIT (Real Estate Investment Trust)

3) Partnership

Today I’m going to talk about a REIT…


REIT (Real Estate Investment Trust). This is like buying stock or paper and is not investing directly into real estate. This is great for those who want the cash flow yield but don’t kid yourself this is not a real estate investment. And in fact, the IRS does not allow owners in a REIT any of the great tax advantages offered to owners of real estate.

A REIT is a company that owns, and in most cases, operates income-producing real estate. These companies own many different types of commercial real estate ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and timberlands.

There are equity REITs, mortgage REITs, Public Non-listed REITs and Private REITS. The two most popular are the equity and mortgage kind.

REITs were created in the United States in 1960 by President Dwight D. Eisenhower to give all investors the opportunity to invest in large-scale diversified portfolios of income-producing real estate in the same way they typically invest in stocks.

During the economic recession that started in 2008, REITS faced huge challenges from the downturn in the economy which depressed share values by 40 to 70 percent.

Most REITs operate along a straightforward and easily understandable business model: By leasing space and collecting rent on its real estate, the company generates income which is then paid out to shareholders in the form of dividends. REITs must pay out at least 90 percent of their taxable income to shareholders.

More than 80 million Americans invest in REIT stocks through their 401(k) and other investment funds.

Again, don’t be confused, this is not a real estate investment. You are speculating just like when you purchase stocks. In fact, that’s what you are doing, you are buying a stock. You are entrusting someone else with your investment and have no say in how it’s invested or have control over it.

For more information on the three ways to invest in apartments pick up my book, “How To Create Wealth Investing In Real Estate.”

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