Okay all you financial gurus. My wife has been wanting to find some rental property down in the Charleston area as an investment. I’m not sure I want to drop that kind of money or make that kind of commitment right now (or anytime for that matter). I have been looking for some place to park some money that is sitting in a savings account and ran across some articles about REITs. Has anyone here invested in any and if so, what were your experiences?
Thanks
“Apathy is the Glove into Which Evil Slips It’s Hand”.
Dear DF…If only it were that simple, and it never is. A Real Estate Investment Trust(REIT)is a portfolio of properties that must by law pay out a percentage of income to the investors. Those properties can be very diverse or very similar based on the prospectus of the investment portfolio. An example would be a REIT that invests in shopping centers, or one that invests in warehouses, or one that invests in business properties in the Dallas/Fort Worth area. As you can see, the make-up of the portfolio defines the risk, and that risk will generate fluctuations in market/share valuation. They generally provide a higher dividend return than most common stock, but dividend income is only one part of gain/loss calculations. They do provide the informed investor an alternative to real estate investment in physical properties, and there are a number of proven performers that have been around for well over 10 years. Do your research…don’t get sold something that you don’t understand. Also…You don’t “Park” money in REITS…you park money in short term CD’s, Money Market Mutual Funds, Savings Accounts, and short term Treasury Bills…check out TIPS( Treasury Inflation Protected Securities) for a safe investment that will offset the pernicious effect of inflation. Keep in mind that your wife is proposing that you become a landlord, or you will have to peel off some of the proposed income to pay a property management firm…“No Free Lunch” my friend.
Sol Mate
Mako 20B
225 Optimax
What boss dog said. Most investors only put a small percentage in reits. I suggest to clients to keep it around 10% as a max only after you have a balanced portfolio. Careful not to stretch for a higher yield and looking at a ten year track record to see the ups and downs. I also suggest looking at at least a five year hold and remain aware of changes in the markets that the REIT invests in.
Rentals are sometimes ok but it depends in your location. I share ownership on several in my old hometown with my brother. He is very handy and manages them.
big dog
No risk no reward…location, location ,location…never risk more than you can afford to lose.
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