The major REITs advantages are based on its functioning like a security that sells like a stock on the major exchanges and invests in real estate either directly or through properties and mortgages. Its prime peculiarity allows you to receive conditions, applying a highly liquid method of investing in real estate. When you buy a share of REITs, you are essentially buying a physical asset with a long expected life span and a potential for income through the rent and property appreciation.
Three types of REITs, Equity, Mortgage and Hybrid REITs, suggest different conditions and advantages for your very purposes.
Equity REITs invest in own properties and is responsible for the equity or value of their real estate assets. Their income comes mostly from their properties' rents.
Mortgage REITs deal with an investment and ownership of property mortgages. These REITs loan money for mortgages to owners of real estate, or purchase existing mortgages or mortgage-backed securities. Revenues here are generated primarily by the interest that they earn on the mortgage loans.
Hybrid REITs combine equity REITs and mortgage REITs by investing in both properties and mortgages.
The real estate owned property is the property, owned by a lender - usually a bank - after an unsuccessful sale at a foreclosure auction. If the property is real estate owned, the bank will then go through the process of trying to sell the property on its own. It will try to remove some of the liens and other expenses on the home, trying to sell it in the market. Being a real estate investor, you should consider these properties, as banks are not in the business of owning homes and, in some cases, the house can be bought at a discount to its market value.
Real estate owned is a term you will definitely consider, when buying the right to participate in the profitability of the company through the ownership. The value of all real estate owned by REITs is close to five hundred billion dollars. When purchasing a REIT, you are not only taking a real stake in the ownership of property via increases and decreases in value, but are also participating in the income, generated by the property. It creates enough safety barriers for investors, as they always have rights to the property underlying the trust while enjoying the benefits of their income.
The way you can also benefit from REITs is that a company, organized as a REIT under IRS regulations, can avoid paying income taxes if it pays out at least ninety percent of its net income (excluding capital gains) as dividends to shareholders. Your corporate income is not taxed in this case, but your price is that you cannot fund the growth with retained earnings. REITs products also provide an average investor with the ability to invest in real estate without a large capital and labor requirements. As soon as the funds of this trust are pooled together, a greater amount of diversification is generated, since the trust companies are able to buy numerous properties and reduce the negative effects of problems with a single asset. When buying a REIT, the capital investment is limited to the price of the unit; the amount of labor invested is constrained to the amount of research, needed to make the right investment.
You can invest in REITs either by purchasing the shares directly on an open exchange or by investing in a mutual fund that specializes in public real estate. You get an additional benefit, when investing in REITs, as they are accompanied by dividend reinvestment plans (DRIPs). REITs also permit you to invest in shopping malls, office buildings, apartments, warehouses and hotels. If you choose REITs, investing specifically in one area of real estate like shopping malls, for instance, or in one specific region, state or country - you can win greatly as well. Diversify your real estate portfolio, understand the dynamics of your investments, including potential risks and rewards, see the optimal variant of your needs and potential abilities, and you will make the difference between a novice and a professional approach to real estate.