Investing in property without buying and managing property

I recently learned about another form of investing in property which is actually a type of stock called a REIT, real estate investment trust.

I stumbled across it as I was looking at stocks. I am not a stock investor. I was just looking to educate myself as markets continue in a bear market. (‘Bear’ market means the market continually goes down while ‘bull’ market means the market continues to go up.)

A REIT is just like any other stock but the company only invests in property and is obligated to give 90% of its earnings to shareholders and they avoid income tax.

What appears to be great about REITs is that you can receive a good return on your investments in dividends. The dividend payout is much greater than just about any normal stock so here is an opportunity to generate monthly cash flow through this type of investment.

The downside is that, at least in the US, you have to pay the normal level of higher income tax from REIT dividends. Another downside is that since it is actually a stock, the value and price of stock can go up and down depending on general market conditions, regardless of the solidity of the REIT you invest in.

In a recent video Ken McElroy, a real estate investor and manager involved in the Rich Dad organization, stated that he feels that most REITs who have been hit by the downturn in property have already adjusted accordingly so now may not be a bad time to buy. He also mentioned that the best REITs right now are ones that invest in family units as commercial property continues to take a dive as the economy gets worse.

You can see a list of REITs here.