What is a REIT?
REITs, or real estate investment trusts, are companies that own or finance income-producing real estate across a range of property sectors. These real estate companies have to meet a number of requirements to qualify as REITs. Most REITs trade on major stock exchanges, and they offer a number of benefits to investors.
What Assets Do REITs Own?
REITs invest in a wide scope of real estate property types, including offices, apartment buildings, warehouses, retail centers, medical facilities, data centers, cell towers, infrastructure and hotels. Most REITs focus on a particular property type, but some hold multiples types of properties in their portfolios.
How Do REITs Make Money?
Most REITs operate along a straightforward and easily understandable business model: By leasing space and collecting rent on its real estate, the company generates income which is then paid out to shareholders in the form of dividends. REITs must pay out at least 90% of their taxable income to shareholders—and most pay out 100 %. In turn, shareholders pay the income taxes on those dividends.
mREITs (or mortgage REITs) don’t own real estate directly, instead they finance real estate and earn income from the interest on these investments.
1031 Exchange Into A REIT
Defer Your Capital Gains Into A REIT
A 1031 exchange, also known as a like-kind exchange, is a provision in the U.S. tax code that allows real estate investors to defer capital gains taxes on the sale of an investment property by reinvesting the proceeds into a similar property or properties. However, many investors are unaware that they can also utilize this strategy to invest in REITs.
Advantages of a 1031 into a REIT
Invest in REITs
The objective of the Future RE Capital Investments I Income REIT is to pay attractive and consistent cash distributions and to preserve, protect, increase and return capital contributions through equity investments in a diversified pool of residential and commercial real estate.
REITs historically have delivered competitive total returns, based on high, steady dividend income and long-term capital appreciation. Their comparatively low correlation with other assets also makes them an excellent portfolio diversifier that can help reduce overall portfolio risk and increase returns. These are the characteristics of REIT-based real estate investment.