Hundreds of infomercials promote real estate investing as the key to wealth. Even the most recognizable real estate investor, Donald Trump, capitalized on the popularity of his television show, The Apprentice, to start Trump University. The mission of Trump University is to provide educational assistance to students looking to profit in real estate investing.
With so many promoters, mainly on the residential side of real estate, everyone is now CHASING THE SAME NICKEL!! Therefore it has become more difficult to make meaningful profits in buying land. The market is saturated.
That is why the SPECULATORS suggest investing in Commercial Real Estate. Yes, Commercial. We know Commercial Real Estate is much more expensive than residential and not everyone has $2 to $5 billion available to go and purchase prime Manhattan real estate. But another entry to becoming an owner in some of the most coveted real estate located in New York, Chicago, Dallas, Los Angeles, Washington, D.C. and Boston does exist.
A REIT or Real Estate Investment Trust, is an entity created by the federal government in 1960 with the purpose of giving everyone the ability to invest in commercial real estate property. A REIT owns income producing commercial property. A REIT must distribute at least 90% of its taxable income to shareholders in the form of a dividend (Source: NAREIT, National Association of Real Estate Investment Trusts). We know how SPECULATORS like dividend paying entities.
REITS come in various investment categories and are publicly traded. Most REITS invest in specific real estate classifications. For example, you have those that invest solely in hotels (Host Hotels and Resorts, symbol:HST), office buildings (Boston Properties, symbol:BXP), shopping centers (Simon Property Group, symbol: SPG), and healthcare facilities (Medical Properties Trust, symbol: MPW).
Again, remember that ALL REITS must pay a dividend to its shareholders. Historically, REITs pay a higher divident % than other publicly traded companies because of its tax status.
One other important feature. As an investor in commercial real estate through the ownership of REIT shares, there is no liability or responsibility for company debts, including the mortgages on any of the properties. The investor is an indirect owner of the properties. The company is completely responsible for mortgage payments and other debt obligations. Therefore, you can capitalize on the upside of stock price increases and the quarterly dividend payments without assuming any liability.
For more information on REITS, go to the NAREIT website, www.reit.com. NAREIT is the representative voice for the global REIT companies, or its trade association.
I am currently looking at two REITS who hold technology related real estate assets: Digital Realty Trust (symbol: DLR) and DuPont Fabros Technology (symbol: DFT).
Next Time….
