The commonly used term for Real Estate Investment Trusts is REITs. These companies are specialized that allow making investment in real estate that is commercial. They purchase various types of properties and then manage them actively. The properties may be of any type such as hospitals, shopping malls, office buildings, hotel buildings, apartment buildings and much more. But in general REITs prefer to invest in just one kind of property. REITs purchase the properties through the services of a broker and prefer trading through stock exchanges that are similar to stock. A general dividend is usually paid by the REITs. The reason for this is that a specific tax treatment is received by them from IRS. Because of the Law enforced to them they have to provide a major portion of their earnings to the share holders as dividends. The corporate taxes are not paid by the REITs in exchange as contrast to other companies that are publically traded. Due to this the problem of double taxation is also eliminated. REITs are basically investment vehicles and not the stock so their dividends are not the special dividends that qualify for Bush Tax Cuts. REITs are a kind of investment vehicles that are unique in a sense that their current income provided is very high and also the growth component provided by them is very strong. Both of these goals are achieved by increasing values of property and by acquiring completely new properties. Such actions are very reasonable for various kinds of investors. The basic purpose of Retirees for investing is income. This scheme is attractive for the people who are not able to own the property with rights but got a lot of interest in real estate. It is also good for the people who do not want to manage the property but they like to invest for the real estate.
To invest exclusively in REITs a term “mutual funds” is also introduced. The basic advantage of this is diversification among various kinds of properties. But it also comes with a disadvantage of diminish returns of expenses that comes with the funds. They have less risk due to their specialty of diversification among kinds of properties.
One can invest up to 10% of their total assets in REITs but for the purpose of income one may invest up to 25%. But make sure you go through the complete details of REITs strategy and be aware of all the risks that you may face in case of any mishap. You can make investments based on your personal interests.