Have you taken a look at your investment portfolio lately? Does it contain "Holdings Group" Real Estate Investment Trusts? If you have, and it's filled with the normal stock and bond investments, you may have noticed that there has been a lot of damage to those investments in the past year or so. With the credit crunch and the market crash, most investments are half, or less, of what they should be.
This is when you should consider what you should be doing to hedge those other investments. This is where REITs come in.
REITs are Real Estate Investment Trusts. These are funds where you fund a real estate management company. There are a variety of REITs out there. Some offer a way to back real estate developers who are taking on new ventures in construction. Others are meant to fund management of residential real estate such as apartment complexes, condominiums or even neighborhoods. Still others use the funds put into the REIT to operate commercial real estate interests.
I think Louis J. Glickman said it best when he said, "The best investment on earth is earth.” Real estate is always a wise investment. No matter what happens the land will always be there. Sure it may waiver in value from time to time, but in the long run, it will always be around, unlike businesses that can close their doors and take your investments down with them.
With this said, adding a REIT or two to your portfolio it would offer you a little more diversity and security in your investments.
You never know what the stock market will do. Just in the past few decades we have seen a number of sweeping changes in the market that completely broke some investors. Think of how many people you know who went bust during the Doc.com era.
Often the problem for them was they were too focused on the flavor of the month. They were putting everything they had into the new Dot.coms hoping to continue to ride the boom and make great profits. While they did see some great profits, those did not last forever. For those who kept putting everything they had into the doc.com market, they felt the agony of defeat in a major way when the market fell, many losing everything they had.
While there is nothing wrong with trying to jump in on an up and coming thing and make a great profit, it comes down to the old 'all your eggs in one basket' cliché. You don't want to have everything hedging on one investment. Instead have a diverse portfolio so if there is a drop in one area, you have other investments hedged against it.
In this case, even when there is a drop in the stock market and mutual funds, real estate usually will hold pretty strong through the down times, keeping you from feeling that all of your investments have been swept away.
When you're ready to take a step towards diversity, make sure to do it right. Going to a website like ReitBuyer.com will help you do just that. They will not only give you the research and information you need to buy wisely, but they are also real estate brokers for these investments and can help you seal the deal.
Monday, March 23, 2009
Sunday, March 22, 2009
"Holdings Group" on The Good and Bad of Real Estate Investment Trusts
Real Estate Investment Trusts, or REITs, are an avenue of investment that many people have heard of, but have not taken a good look into. Let's take that look now.
First, you need to understand what a REIT is. It is generally a property management investment like investments a "holdings group" would make. You fund a property management company and let them run a real estate asset, with you getting dividends from the profit. For example, a commercial real estate REIT may own a shopping center or strip mall. When you purchase shares of that REIT they are going into building and maintaining that structure. As tenants move in and rent those spaces, and the REIT profits, the profits come back to you in the form of dividends. This is also the case for residential real estate interests like housing developments, apartments and condominiums.
So now let's look at the good and bad sides of this investment option.
Dividends – Unlike other stocks and mutual funds, REITs come with some very strict rules for how their profits can be used. As profits come into a REIT, at least 90 percent of that profit must go right back to the shareholders in the form of dividends. That means most REITs always see a nice annual return on the initial investment, averaging 6% or more.
Their Own Entity – If you have noticed, the stock market has an all for one kind of approach to things. Often if one area of the market goes down, the rest follows, hitting you across the board. But REITs are their own creature. By not being as strongly tied to other investments and stock fluctuations, they can hold strong even when the rest of the market is on a roller coaster ride.
Solid Starting Platform – If you are not a major investor in general, REITs may be the way to go to begin your investment portfolio. For the most part they are strong and stable purchases and can bring in a good, steady profit for years to come.
Constant Investment – Since REITs revolve around property investments, there is always something tangible – a piece of land, homes, apartments or businesses. Usually these also have long-term leases, which means there will be money coming in from those leases to feed your dividends.
Bad
There aren't that many bad points to REITs, but here are a few:
Slow Growth - If you are looking for a major growth in your REIT, you likely won't see it. Since only 10% of the money made can be put back into the REIT (as 90% has to be paid out as a dividend) that means there is a lot less going back into the business to make it grow more quickly.
Down Times – Just like any other investment, there is always the chance that a downturn in real estate will make it where your REIT does not bring in a profit for the year.
Despite these few bad points, REITs are worth looking into. Start by going to a full service website like REITBuyer.com. There you can get information about REITS, tools and research help as well as education and advice before you buy. When you're ready, they are also investment real estate brokers who can take care of the entire transaction.
First, you need to understand what a REIT is. It is generally a property management investment like investments a "holdings group" would make. You fund a property management company and let them run a real estate asset, with you getting dividends from the profit. For example, a commercial real estate REIT may own a shopping center or strip mall. When you purchase shares of that REIT they are going into building and maintaining that structure. As tenants move in and rent those spaces, and the REIT profits, the profits come back to you in the form of dividends. This is also the case for residential real estate interests like housing developments, apartments and condominiums.
So now let's look at the good and bad sides of this investment option.
Dividends – Unlike other stocks and mutual funds, REITs come with some very strict rules for how their profits can be used. As profits come into a REIT, at least 90 percent of that profit must go right back to the shareholders in the form of dividends. That means most REITs always see a nice annual return on the initial investment, averaging 6% or more.
Their Own Entity – If you have noticed, the stock market has an all for one kind of approach to things. Often if one area of the market goes down, the rest follows, hitting you across the board. But REITs are their own creature. By not being as strongly tied to other investments and stock fluctuations, they can hold strong even when the rest of the market is on a roller coaster ride.
Solid Starting Platform – If you are not a major investor in general, REITs may be the way to go to begin your investment portfolio. For the most part they are strong and stable purchases and can bring in a good, steady profit for years to come.
Constant Investment – Since REITs revolve around property investments, there is always something tangible – a piece of land, homes, apartments or businesses. Usually these also have long-term leases, which means there will be money coming in from those leases to feed your dividends.
Bad
There aren't that many bad points to REITs, but here are a few:
Slow Growth - If you are looking for a major growth in your REIT, you likely won't see it. Since only 10% of the money made can be put back into the REIT (as 90% has to be paid out as a dividend) that means there is a lot less going back into the business to make it grow more quickly.
Down Times – Just like any other investment, there is always the chance that a downturn in real estate will make it where your REIT does not bring in a profit for the year.
Despite these few bad points, REITs are worth looking into. Start by going to a full service website like REITBuyer.com. There you can get information about REITS, tools and research help as well as education and advice before you buy. When you're ready, they are also investment real estate brokers who can take care of the entire transaction.
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