Real Estate Investment Trusts (REITs)

Real estate investment trusts (REITs) offer a practical way for real estate investors to create an income stream with the added benefit of eliminating taxes. Separate from other types of stocks and bonds, the real estate market offers performance and diversification benefits that can be attractive to many self-directed IRA investors.

Benefits of investing in REITs include:

  • True diversification of your investment portfolio

    Market stays independent from stocks and bonds, providing additional tax advantages and a buffer from market fluctuations.
  • Passive Income

    One of the primary benefits of REITs is their ability to provide regular dividend income, as they are required to distribute taxable income to shareholders. This consistent cash flow can be a reliable source of payouts for investors.
  • Capital Appreciation

    Additionally, REITs offer the potential for capital appreciation, allowing your investment to grow in value over time. By combining dividend income with the opportunity for capital appreciation, REITs can enhance your financial stability and help you build wealth passively.
  • Multiple types

    Choose from three main types based on preferences.

What is a REIT?

A real estate investment trust is a type of pooled real estate investment that is designed to reduce or eliminate tax by paying out REIT dividends to retain REIT status while providing returns.

REIT investing operates similarly to mutual funds, as individual investors acquire ownership in commercial real estate portfolios that receive income from the facilities. Diversification is a benefit of REITs, as the real estate market does not directly correlate to other types of stocks and bonds. These income-producing assets provide tax benefits such as a reduction of taxable income, increased dividend yields and distributions.

Navigation Tip:

Many REITs are accompanied by DRIPs, or dividend reinvestment plans. This allows shareholders to automatically reinvest real estate asset dividends into additional shares of the same company.

How to Use Your REIT Investments

Types of real estate properties that can be included in REITs:

Checkmark
Apartment complexes
Checkmark
Student housing
Checkmark
Hospitals and healthcare facilities
Checkmark
Industrial properties
Checkmark
Hotels
Checkmark
Office buildings
Checkmark
Shopping malls
Checkmark
Commercial properties
Checkmark
Leases and leased properties
Checkmark
And more

Types of REITs

How to Invest in REITs

Investors are encouraged to do adequate research or contact a broker/financial advisor, attorney or CPA to determine if REITs are an appropriate investment.

Some REITS investors are subject to investment limitations and have implications for capital gains and income taxes as a qualified business income, so it’s important to work with a management team that understands regulatory governance. Once you have learned about the benefits of REITs and determined this asset class is suitable for you, it can be purchased with your Self-Directed IRA or other retirement accounts at Mainstar Trust to create a more diversified portfolio.

Investors Also Consider

Private Lending

BDCs

Stocks

Login