Is a REIT right for you?

There is no escaping the real estate market, try as you may.  You most likely own a house, and may even own a rental property that is subject to swings in the local housing market. Even if you are a renter, don’t think your landlord isn’t monitoring the rental landscape, looking for an opportunity to bump your monthly check a few dollars higher.

The good news is that we get to pick the level of involvement we want to have with real estate.  The more active participants will own a house where they are responsible for the maintenance, while the more passive among us will choose to rent and avoid those headaches.  These choices are not limited to our personal lives; they are also the same choices we make when choosing to invest in real estate. Investing in rental properties can be an excellent way to build wealth; housing prices appreciate over time and mortgage balances are paid down. Unfortunately, you also must deal with the tenants, trash, and toilet issues that come with it.
My track record with active real estate management is spotty at best (okay, it’s awful).  Luckily, I am good at the other kind of real estate investing: the passive kind where you don’t have to clean up after strangers. Our firm has spent a significant amount of time and resources looking for areas to diversify our clients’ portfolios, and we are excited about Real Estate Investment Trusts, or REITs.
There are several trends driving opportunities in this market of which we are taking advantage. First, our real estate managers are finding great value on the buildings being purchased. Commercial real estate is an attractive investment right now, and most of our recommendations are paying a 5% – 7% annual dividend.
Also, we are seeing major real estate companies offer products without a sales charge.  As an independent investment advisor, we do not provide any securities products that have a commission attached, which has limited the number of offerings that we recommend. The sales charge that most of the country pays, but you do not, is a full 10%! This savings increases the monthly cash dividend you receive in your account.
Lastly, an investment in real estate used to mean zero control over when you can have your money back. REITs have responded to the market demand for more liquidity by providing solutions where you can have access to your funds on a quarterly, and sometimes daily basis.  They are still not as liquid as a mutual fund (and we need to review the prospectus before you purchase), but there is greater transparency in accessing your funds than ever before.
A REIT may or not be right for you. Every client has unique goals, and we customize your portfolio to where you are personally trying to go.  We remain committed to a continuous monitoring of the investment landscape and will continue to present opportunities that we feel are in your best interest. Please contact your advisor if you would like further information, and as always, we appreciate your business.

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