Next in our “Real Estate Investment Trust (REIT)” series…

The investment vehicle known as the Real Estate Investment Trust (REIT) is an excellent option for the real estate investor to explore in today’s volatile economy.

Read additional information about the basic structure of a REIT…

In a REIT, the investor enjoys several distinct benefits over traditional real estate investment vehicles.  Whether the REIT is a public or private entity, the investor owns shares of ownership in a pool of investment capital, which provides the ability to diversify the real estate investment.  Profits, paid in the form of stock dividends, are not taxed twice as is typically the case with corporate profits.  Dividend yields are often higher in a REIT than most stocks and other investment vehicles.

In Arizona, several public REITs exist, as do a variety of private REIT investment groups.  These groups may buy property directly or they may loan money to developers, in which case ownership is maintained by the developer.  In the latter case, the investment typically earns income in the form of interest paid on the loan.  This scenario does not provide the same level of appreciation as a direct property purchase REIT, however.  Hybrid REITs also exist, where some funds are invested directly into real estate holdings and others are loaned to developers.

Here’s a small list of REITs in Arizona that include the Arizona Land Income Corp., Starwood Lodging Trust, and Franchise Finance Corp. of America.

One caveat the investor should keep in mind when investing in private REITs include a lack of liquidity.  Most private REITs require that the investment remain in the fund for at least two years, however that may be a strong selling point for many investors.  The liquid nature of the stock market, for example, exposes the investor to frequent swings – some significant – in the value of the portfolio.  The long term investment nature of a private REIT removes a lot of volatility from the investment equation.

Many high net worth investors prefer to invest in private REITs for just this reason.  The income supplements their bond investment income, and offers a lower risk and higher return than many other investment options.  Program fees in private REITs are sometimes high, and may range from 10% to 15%, however current economic conditions have seen fees fall in an attempt to attract investors.

Either  way, the income stream created by REITs make them an excellent option for the real estate investor to explore.

Looking for Arizona property for your REIT?  Watch our “income property” page for our hand-picked selections of current homes for sale in the Phoenix Metro area with CAP Rates of 10% and more.

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NOTE:  We pride ourselves on bringing you the most informative, up-to-date, and accurate information possible about the often-confusing world of real estate investing.  Nothing we post however is intended to be taken as legal advice.  You should always contact a licensed legal professional for information and advice about your own unique investment scenarios.

Artisan Real Estate Group is one of the top boutique real estate firms in Arizona.  We provide an end-to-end suite of services to our investor clients, including a full range of residential and commercial real estate services, income property location service, investor services, property remodeling, restoration, and rehabilitation, real estate finance consultation, REO and bank-owned property services, trustee sale consultation and bidding representation, and new home builder services.   Our international team specializes in helping investors from all over the world with their Arizona real estate transactions.  Our goal is to find the best properties with the highest cap rate and ROI for our investor clients.  Contact us today to find out how we can help you grow your personal wealth and investment portfolio.  Artisan Real Estate Group, http://www.artisanrealestategroup.com/  or call us at (602)644-1280.  Email: info@artisanrealestategroup.com

First in our “Real Estate Investment Trust” (REIT) series…

A real estate investment trust, also known as a REIT (pronounced “reet”) is a special tax designation for purchasing income property in the name of a corporation.  Think of REITs as the real estate equivalent of what mutual funds are to stocks.  REITs are formed for the purpose of eliminating corporate income tax on real estate investment income, but also for a few other reasons that may be attractive to the investor.

First used in the 1800s, the REIT’s original purpose was to help the investor avoid being taxed twice for real estate investment income.  Investors pool their funds into the REIT, and the REIT purchases and holds the properties.  To qualify as a REIT, the entity must be formed either as a corporation (the typical approach), a trust, or an association.  There must be 100 or more investors, the REIT must derive 75% or more of its gross income from real estate investment property income, and 75% of the REIT’s assets must be real estate.

A REIT is run just like any other corporation, with a board of directors, officers as required by the laws of the state in which the REIT is organized, and it may be privately or publicly held.  A publicly traded REIT is joined simply by buying stock, and is left just as simply.  Private real estate investment trusts, on the other hand, are slightly harder to take part in.  Private REITs usually require that the investor buy in with a minimum amount of cash and remain in for a minimum period of time.

Public REITs are simple to buy in or cash out of, however they tend to be less stable, growing or falling in value with market fluctuations.  The advantages of private REITs is that, even though they may have more restrictive rules, the investor will enjoy a more stable investment environment that is less influenced by the daily fluctuation of the trading markets.

Like any investment vehicle, a REIT can have both risks and drawbacks.  However, approached properly, the REIT offers one of the best real estate investment vehicles available to the investor today.

Next in the series…  The Legal Structure of the REIT.

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NOTE:  We pride ourselves on bringing you the most informative, up-to-date, and accurate information possible about the often-confusing world of real estate investing.  Nothing we post however is intended to be taken as investment, real estate, or legal advice.  You should always contact a licensed investment, real estate, or legal professional for information and advice about your own unique investment scenarios.

Artisan Real Estate Group is one of the top boutique real estate firms in Arizona.  We provide an end-to-end suite of services to our investor clients, including a full range of residential and commercial real estate services, income property location service, investor services, property remodeling, restoration, and rehabilitation, real estate finance consultation, REO and bank-owned property services, trustee sale consultation and bidding representation, and new home builder services.   Our international team specializes in helping investors from all over the world with their Arizona real estate transactions.  Our goal is to find the best properties with the highest cap rate and ROI for our investor clients.  Contact us today to find out how we can help you grow your personal wealth and investment portfolio.  Artisan Real Estate Group, http://www.artisanrealestategroup.com/  or call us at (602)644-1280.  Email: info@artisanrealestategroup.com