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- About Us

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• Glossary
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  - Introduction to Investing - Starting - Five Questions to Ask Before You Invest
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  1. Home.
• Introduction to Investing.
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  - How to Submit Comments to the SEC.
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  Real Estate Investment Trusts (REITs)
  
  What are REITs?
  
  Real estate financial investment trusts (" REITs") permit people to purchase large-scale, income-producing genuine estate. A REIT is a company that owns and generally runs income-producing real estate or associated properties. These might include office complex, shopping malls, homes, hotels, resorts, self-storage centers, warehouses, and mortgages or loans. Unlike other realty business, a REIT does not establish property residential or commercial properties to resell them. Instead, a REIT purchases and develops residential or commercial properties mostly to run them as part of its own investment portfolio.
  
  Why would somebody buy REITs?
  
  REITs provide a method for specific investors to earn a share of the income produced through business property ownership - without actually needing to go out and purchase business realty.
  
  What types of REITs are there?
  
  Many REITs are signed up with the SEC and are publicly traded on a stock market. These are referred to as openly traded REITs. Others might be signed up with the SEC however are not publicly traded. These are referred to as non- traded REITs (likewise referred to as non-exchange traded REITs). This is one of the most essential differences among the various type of REITs. Before buying a REIT, you ought to comprehend whether it is openly traded, and how this could impact the benefits and risks to you.
  
  What are the benefits and of REITs?
  
  REITs use a method to include real estate in one's investment portfolio. Additionally, some REITs may offer greater dividend yields than some other financial investments.
  
  But there are some risks, especially with non-exchange traded REITs. Because they do not trade on a stock exchange, non-traded REITs involve special threats:
  
  Lack of Liquidity: Non-traded REITs are illiquid investments. They usually can not be offered easily on the free market. If you need to sell a property to raise cash rapidly, you may not be able to do so with shares of a non-traded REIT. Share Value Transparency: While the market price of a publicly traded REIT is easily accessible, it can be challenging to determine the worth of a share of a non-traded REIT. Non-traded REITs generally do not supply a quote of their worth per share till 18 months after their offering closes. This may be years after you have made your financial investment. As an outcome, for a significant period you might be not able to examine the value of your non-traded REIT financial investment and its volatility. Distributions May Be Paid from Offering Proceeds and Borrowings: Investors may be brought in to non-traded REITs by their fairly high dividend yields compared to those of openly traded REITs. Unlike openly traded REITs, nevertheless, non-traded REITs frequently pay circulations in excess of their funds from operations. To do so, they might use providing earnings and borrowings. This practice, which is generally not used by publicly traded REITs, decreases the value of the shares and the money offered to the company to purchase additional assets. Conflicts of Interest: Non-traded REITs usually have an external supervisor instead of their own workers. This can cause possible disputes of interests with investors. For instance, the REIT might pay the external supervisor substantial fees based upon the quantity of residential or commercial property acquisitions and properties under management. These charge incentives might not always align with the interests of shareholders.
  
  How to purchase and sell REITs
  
  You can purchase an openly traded REIT, which is listed on a significant stock exchange, by buying shares through a broker. You can acquire shares of a non-traded REIT through a broker that takes part in the non-traded REIT's offering. You can likewise purchase shares in a REIT shared fund or REIT exchange-traded fund.
  
  Understanding charges and taxes
  
  Publicly traded REITs can be bought through a broker. Generally, you can acquire the common stock, preferred stock, or debt security of an openly traded REIT. Brokerage charges will apply.
  
  Non-traded REITs are generally sold by a broker or monetary advisor. Non-traded REITs usually have high up-front costs. Sales commissions and in advance offering charges typically total around 9 to 10 percent of the investment. These expenses lower the value of the investment by a significant amount.
  
  Special Tax Considerations
  
  Most REITS pay out a minimum of 100 percent of their gross income to their investors. The investors of a REIT are accountable for paying taxes on the dividends and any capital gains they receive in connection with their investment in the REIT. Dividends paid by REITs typically are dealt with as normal income and are not entitled to the reduced tax rates on other kinds of corporate dividends. Consider consulting your tax consultant before buying REITs.
  
  Avoiding scams
  
  Be cautious of any person who attempts to sell REITs that are not registered with the SEC.
  
  You can verify the registration of both openly traded and non-traded REITs through the SEC's EDGAR system. You can likewise utilize EDGAR to evaluate a REIT's yearly and quarterly reports in addition to any offering prospectus. For more on how to use EDGAR, please go to Research Public Companies.
  
  You need to likewise examine out the broker or financial investment adviser who suggests acquiring a REIT. To find out how to do so, please check out Dealing with Brokers and Investment Advisers.
  
  Additional information
  
  SEC Investor Bulletin: Real Estate Investment Trusts (REITs)
  
  FINRA Investor Alert: Public Non-Traded REITs - Perform a Careful Review Before Investing
  
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