Real estate investment trusts (REITs) offer a practical way to invest in real estate 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.
Market stays independent from stocks & bonds.
Competitive long-term performance.
Choose from three main types based on preferences.
A real estate investment trust is a type of real estate investment that is designed to reduce or eliminate tax while providing returns from real estate. REIT investing operates similarly to mutual funds, as individual investors acquire ownership in commercial real estate portfolios that receive income from the facilities.
REIT funds must pay out dividends in order to retain their REIT status and receive tax benefits. Diversification is a benefit of REITs, as the real estate market does not directly correlate to other types of stocks and bonds.
Many REITs are accompanied by DRIPs, or dividend reinvestment plans. This allows shareholders to automatically reinvest dividends into additional shares of the same company.
A private REIT is not registered with the SEC. The shares are not listed on a public exchange such as the New York Stock Exchange (“NYSE”) and are not directly affected by stock market volatility. Only accredited investors can purchase a private REIT. These products are illiquid and frequently have limited redemption windows that vary by company.
Publicly traded REITs are listed on a stock exchange and, as such, they are subject to the volatility of the stock market. Because these REITs are registered with the SEC and publicly traded, there is significant public information available. There are no restrictions as to who can invest in publicly traded REITs. Publicly traded REITs are liquid and may be traded daily, just like traditional stocks.
Public non-traded REITs must file with the SEC, which requires public reporting. Shares, however, are not traded on a stock exchange. These shares are also illiquid and not directly subject to stock market volatility, but frequently have limited redemption periods. Non-traded REITs are available to all investors but are subject to certain investment limits that vary by fund.
Investors are encouraged to do adequate research or contact a broker/financial advisor, attorney or CPA to determine if REITs/BDCs are an appropriate investment. Once you have determined that a REIT or BDC is suitable for you, it can be purchased with your Self-Directed IRA or other retirement account at Mainstar Trust. Click here to find out how to use a Mainstar Trust account to invest in a REIT/BDC.