Attention home owners, landlords and real estate aficionados. If you like the idea of a consistent income stream but are looking for ways to own property without the hassle of managing it, paying for maintenance and upkeep, shelling out money for taxes on the property, as well as the potential on the income you receive … then perhaps REIT investing may be one idea to consider.

REITS or “Real Estate Investment Trusts” are one solution investors may want to explore when thinking about ways to diversify their investments but also own non-correlated assets in their portfolios. The idea is simple. Incorporate an investment strategy into your portfolio that focuses on a rental concept where you are part of an ownership structure that purchases hard assets (such as commercial buildings), and you could receive dividends from the company that owns the properties. Important to note: Dividends and return of capital are not guaranteed.

This is one example; there are many types of REITS and they can be purchased on a public exchange or even through private offerings where the company may or may not be public, in which the company creates an offering for investors to partake in. Typically, these offerings will have an estimated dividend and a time line the offering will be available before it closes.

There are a wide variety of REIT products that can include companies that engage in financing real estate, to others that primarily focus on acquisition of income producing properties to own and in some cases manage and operate. The REIT sectors can include the healthcare industry (including hospitals, rehabilitation clinics and elder care facilities), to retail stores (including shops, malls and anchored plazas), to commercial properties (which may include office, warehouses, and apartment buildings), to government-owned properties.

One attractive component of REIT investing can include tax-deferred income. If the REIT is structured to include hard assets, then there is usually a depreciation that is factored into the income distributions. Another important area to understand is how the income is taxed. Ordinary income, return of capital and any capital gains will each be taxed differently. Each REIT will have its specifications for how income is taxed to investors as well as any possible depreciation, and this can result in a significant deferral of income received to none at all. It is recommended to speak with your tax professional if you are considering REIT investing to better understand tax liabilities and risks.

When investing in a REIT product, it is important to understand what your primary goals are as well as to evaluate and understand areas such as the potential for illiquidity, fees that may be included and the possibility of losing principal or inconsistent/possible loss of dividend income.

Alternative investments such as REITS do have heightened risks and all concerns or questions should be reviewed and discussed with your financial advisor to understand the suitability.


Brian A. Shire
Independent Financial Group
619.534.4240 or email at

Registered representative offering securities and advisory services through Independent Financial Group, LLC (IFG), a registered broker-dealer and investment advisor. Member FINRA and SIPC. IFC and Wealth Alliance, LLC are unaffiliated entities. OSJ Branch: 12671 High Bluff Drive, Ste. 200 San Diego, CA 92130