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- About Us

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  - Introduction to Investing - Getting Going - Five Questions to Ask Before You Invest
• Understanding Fees
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  1. Home.
• Introduction to Investing.
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  - Save and Invest - Define Your Goals.
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  Real Estate Investment Trusts (REITs)
  
  What are REITs?
  
  Real estate investment trusts (" REITs") enable individuals to invest in massive, income-producing realty. A REIT is a company that owns and generally runs income-producing realty or related properties. These may consist of office buildings, shopping malls, homes, hotels, resorts, self-storage centers, storage facilities, and mortgages or loans. Unlike other genuine estate business, a REIT does not establish real estate residential or commercial properties to resell them. Instead, a REIT purchases and establishes residential or commercial properties primarily to run them as part of its own financial investment portfolio.
  
  Why would someone buy REITs?
  
  REITs supply a way for private financiers to make a share of the earnings produced through business real estate ownership - without really having to go out and purchase commercial real estate.
  
  What kinds of REITs are there?
  
  Many REITs are registered with the SEC and are publicly traded on a stock exchange. These are referred to as publicly traded REITs. Others might be signed up with the SEC but are not openly traded. These are known as non- traded REITs (also called non-exchange traded REITs). This is among the most crucial distinctions among the numerous kinds of REITs. Before purchasing a REIT, you ought to comprehend whether or not it is publicly traded, and how this might affect the advantages and risks to you.
  
  What are the benefits and threats of REITs?
  
  REITs use a method to consist of genuine estate in one's investment portfolio. Additionally, some REITs might use greater dividend yields than some other financial investments.
  
  But there are some threats, especially with non-exchange traded REITs. Because they do not trade on a stock market, non-traded REITs include unique threats:
  
  Lack of Liquidity: Non-traded REITs are illiquid investments. They normally can not be offered easily on the free market. If you require to sell a possession 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 cost of a publicly traded REIT is readily available, it can be difficult to determine the value of a share of a non-traded REIT. Non-traded REITs usually do not provide a quote of their worth per share till 18 months after their offering closes. This might be years after you have actually made your investment. As a result, for a significant period you may be not able to assess 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 relatively high dividend yields compared to those of publicly traded REITs. Unlike publicly traded REITs, nevertheless, non-traded REITs often pay circulations in excess of their funds from operations. To do so, they might utilize offering profits and borrowings. This practice, which is normally not utilized by publicly traded REITs, decreases the worth of the shares and the money readily available to the company to acquire extra assets. Conflicts of Interest: Non-traded REITs normally have an external supervisor instead of their own employees. This can result in prospective disputes of interests with investors. For example, the REIT might pay the external manager substantial charges based on the quantity of residential or commercial property acquisitions and possessions under management. These charge incentives may not always align with the interests of investors.
  
  How to purchase and sell REITs
  
  You can buy a publicly traded REIT, which is noted on a significant stock exchange, by purchasing shares through a broker. You can acquire shares of a non-traded REIT through a broker that participates in the non-traded REIT's offering. You can also acquire shares in a REIT shared fund or REIT exchange-traded fund.
  
  Understanding charges and taxes
  
  Publicly traded REITs can be purchased through a broker. Generally, you can buy the typical stock, preferred stock, or financial obligation security of an openly traded REIT. Brokerage fees will apply.
  
  Non-traded REITs are generally offered by a broker or monetary adviser. Non-traded REITs usually have high up-front charges. Sales commissions and upfront offering fees usually total roughly 9 to 10 percent of the financial investment. These expenses lower the worth of the financial investment by a significant amount.
  
  Special Tax Considerations
  
  Most REITS pay a minimum of 100 percent of their taxable earnings to their shareholders. The investors of a REIT are responsible for paying taxes on the dividends and any capital gains they receive in connection with their investment in the REIT. Dividends paid by REITs normally are treated as normal income and are not entitled to the minimized tax rates on other types of corporate dividends. Consider consulting your tax advisor before buying REITs.
  
  Avoiding scams
  
  Watch out for anyone who tries 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 use EDGAR to review a REIT's yearly and quarterly reports along with any offering prospectus. For more on how to utilize EDGAR, please go to Research Public Companies.
  
  You need to also have a look at the broker or financial investment adviser who suggests buying a REIT. To discover how to do so, please visit Working with Brokers and Investment Advisers.
  
  Additional info
  
  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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