Benifits of owning stock in a REIT?

Question

Benifits of owning stock in a REIT?

Answer 1

1. REIT=reel estate investment trust...sorta like a mutual fund...

it hav many "propertees" tu spred the risk.

2. Several tipes av reits

2 maen tipes...1=for hi inkum, 2=stok av management kumpanees.

3. & then theer R mutual fuinds av reits.  This is the safest kauz it spred risk even more.

4. The original idea was tu diversifi bi spred yer munee tween different klasses.  Idea is reel estate will NOT go up & down in sink with stoks & bonds.  That idea is now under fire kauz av the hous bubbel & bust.

5. biggest argument ginst reits: most folks hav most av theer munee tied up in theer hous=reel estate.  Thus yu alredee hav 2 much munee "invested" in reel estate.

Answer 2

REITs tend to pay high dividends compared to other stocks, so they historically have been very popular as somewhat riskier substitutes for bonds.  During the housing boom they also surged in value, producing handsome capital gains up until about a year and a half ago.  Now, of course, they are slumping with the housing market.  But that slump has also increased their dividend yield to the point that they again look like reasonable alternatives to bonds for people looking for steady dividends.

If possible REITs should be held in IRAs or other tax advantaged accounts, since their dividends are taxed as ordinary income, unlike qualified dividends from other stocks.

Answer 3

The value lies in a couple of things.  1.  REITs are required to pay 90% of their earnings as dividends which are not tax advantaged.  That makes REITs a dandy investment for IRAs but not so dandy for regular investments.  2. REITs are asset plays whereas owning most other stocks are earnings plays.  That makes REITs somewhat uncorrolated to market returns in general. In other words a portfolio that contains REITs should have less market risk than a portfolio that does not.