A variety of solid investment vehicles are available to you in real estate but some are more lucrative than others are. A popular choice is called real estate investments trusts (REITs). What are REITs and how can these popular investment strategies help you expand and protect your portfolio, so you can realize the American dream? Here’s a quick overview.
What are REITs?
REITs are entities or companies that are fully funded by a group of real estate investors with the goal of creating a portfolio of profit-generating real estate investments. These can include commercial and residential properties that are privately owned and managed by the trust. They are so popular, in fact, that they’re one of the most widely sought investment tools in the modern era.
One reason REITs are so popular is because these types of trusts must guarantee that at least 90% of the taxable income they generate is passed along to the investors in the form of dividends. How popular are these vehicles for retirement? New data suggests that nearly 150 million Americans have some form of an investment placed in REITs, either through their retirement accounts and savings or via direct investments.
What’s more, many of the most popular REITs are publicly traded on the NYSE or the NASDAQ stock exchanges, which allows individual investment (via stock purchases). Like any publicly traded stock, these types of investments are not ironclad, but have proven to be time-tested, lucrative and relatively safe.
REITs can enable you to pursue a sound investment strategy as part of your estate planning mechanism that can serve to build a passive income for you and for your family. Passive income is the most desirable type of income because it offsets your current income and allows you to take advantage of the tax benefits offered by housing this income in a pass-through entity, such as an LLC or a partnership.
Taxation Can Be Complicated
The reality is that taxes in general are complicated. But REITs can be even more complicated, and the investment in them will require the oversight of an experienced professional. This is why it’s imperative that you consult with an Atlanta estate planning attorney or tax professional to help gain the guidance you’ll need to safeguard your future, plan for after your passing and reduce your tax liability and exposure.
A professional can help you better understand how taxation works with REITs, and can analyze your future goals while laying out a strong plan of action that’s the most beneficial for your specific situation. You have plenty of options with REITs, including an REIT mutual fund, an ETF (exchanged traded fund), and other investment vehicles.
A professional can help you determine which type of real estate investment trust is best suited for your position and can help you integrate a plan of action to create a steady stream of passive income from your investment while reducing your tax exposure.
Need help with your REIT? Give our Atlanta estate planning law firm a call today … we’re here to help you plan for the future.