REITs are a good investment for you?

Many people dream of investing in large apartment, buildings. Shopping centers, office and commercial – yet few have the necessary resources and expertise for such investments. Real Estate Investment Trusts (REIT), one of the ways that ordinary people can invest in the large and expensive real estate.

The REIT invests in income producing properties. These properties can be condominiums, commercial properties. Strip shopping centers, hospitals, housing, and so on. In practical terms, the REIT is similar to unit trust investments are pooled, and the REIT buys and manages income-generating properties.

How Do You Make Money From REITs?

REITs are essentially landlords. The revenue consists of all the rents collected from the tenants. The expenses include property management, property tax, utilities, mortgage payments, and more. The profit is what's left over after all the bills are paid.

This profit is given back to investors in the form of dividends.

The great news is that REITs have a powerful incentive to distribute a minimum of 90% of the taxable income to investors; REITs do not have to pay corporate income tax if they meet the 90% minimum payout.

There are 3 main types of REITs:

1. Equity REIT.

The most common type is an equity REIT. These companies invest in income producing property that the REIT will also manage. When REIT's are considered as investments, this is the type that is typically being referred to.

2. Mortgage REIT.

These REITs invest in outstanding mortgages and also make loans backed by real estate. While the underlying property values are important for both equity and mortgage REITs, mortgage REITs values are also very dependent on interest rates. This type of REIT accounts for less than 10% of all REITs operating in the United States.

3. Hybrid REIT.

The hybrid REIT is a combination of an equity REIT and mortgage REIT. So this type invests in both mortgages and actual real estate assets. The hybrid REIT potentially has the greatest diversification.

Some equity and hybrid REITs will invest in numerous properties of varying size and function. This diversification should provide some stability relative to the change in value of the individual properties. What can affect values? Vacancies, non-payment of rent, general downturn of the local market, and interest rates are a few of the things that can affect the values.

How Do You Evaluate an REIT as an Investment?

As an investor, you can buy and sell your shares in an REIT just as you could with any other stock. Be sure you educate yourself in the proper way to evaluate an REIT. It is not in the business of manufacturing anything and it is not providing a service. The common methods of evaluating stocks may not apply in the same way.

Most REITs specialize in a single type of property, like apartments, retail space, or commercial office space. Many REITs limit themselves to a geographical area as well; this can be an important consideration when attempting to determine which REIT is best for you.

A great REIT will manage its properties to get the best possible income growth and then reinvest that money in properties that generate an even greater return than the existing properties. Those are the two things an equity REIT must do to excel.

A good measure for evaluating REITs is "funds from operations" (FFO).

This discounts gains and losses from the sale of assets and adds back depreciation. A long-term FFO growth is generally a good indicator of the financial health of an REIT.

While FFO gives an indication of the strength of an REIT, it is not the only predictor of a REIT's value. REITs own a lot of assets, and the value of those assets has the largest impact on the current asking price of an REIT's shares. 

The REIT may be the investment vehicle, which was looking to expand your portfolio. As always, be sure to educate yourself, or seek advice from a financial expert before investing your hard-earned no money for new investment.

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Make your money work for you with these Easy, liquid investments

A myriad of savings and investment options available today is complex and confusing. If you are not familiar with the investment strategy, it is not easy to choose the options that are the best value for your money.

The bottom side of investing money that you can lose money when they were invested. For example, if you invest in real estate, you need to sell or lease the property to see money from it.

On the other hand, if you invested in liquid investments, easier access to money, if need be. A liquid investment, then the best of both worlds: the search for interest money, and you still can get it if need be.

Try these investment options that are both easy and liquid – you can invest in them right at your own bank and you have fast access to your money should the need arise:

1. Certificate of deposit.

A certificate of deposit is one of the simplest investment options with decent returns on your money.

  • A certificate of deposit (CD) is also referred to as a time deposit, which means your money has to stay invested for anywhere from 3 months up to 5 years for the stated return.
  • If you need your money for a true emergency, you can cancel the CD, although you'll forfeit some, if not all, of your return on it. A good option is to go with the short, 3 month CDs until your finances are stable and you have some additional money put away.
  • Interest rates are higher than a regular savings account.
  • Your savings are insured at all times.
  • Your interest rates are set to increase the longer you have your money saved.

2. Money market savings account.

Having a money market savings account is also a great option for investing and making the most from your money. With this type of account, your interest rates are much higher than with a standard savings account.

  • One added benefit of such an account is that you would be limited to the number of withdrawals each month as a technique to safeguard your investments so you'll make the most on your money.
  • Another benefit is that your investment of $250,000 or less is insured.

3. Money market mutual fund.

Money market mutual funds are a little riskier than CDs and money market savings accounts; however, with greater risk comes the opportunity for greater returns. These funds allow short-term security investment. However, the fact that you are investing in short-term securities means that your investment would be exposed to less risk.

  • Tip: To get the most out of it, try to make your investment principal as high as possible because this is when the truly good returns come into play.

4. Tax exempt money market.

A tax-exempt money market option is a type of money market fund, the difference is that it's liquid and allows investment in tax-exempt securities. You don't need to be as concerned with investing the highest amount possible because your returns will be tax-free and of more financial worth to you.

You can expect that the high yield, as experienced investors only adding a little common sense to the decisions. Learn about the less-liquid investments, and once you build up that fund, where money works for you. You will have an easy transition to higher earning portfolio.

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