A Brief History Lesson On REIT

Former President Dwight D. Eisenhower is revered by countless Americans, listing him among the best Commanders-in-Chief that the U.S. has ever had. During his time in office from 1953 to 1961, there were plenty enduring programs and innovations that the country still benefits from up to today. Some examples were the Interstate Highway System, the establishment of NASA, the Civil Rights Act of 1957, and the Atomic Energy Act, among others.

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His presidency was also known for widespread economic prosperity throughout his two terms, save for a minor recession that hit the nation in 1958. One of the economy-related legislations that gave investors additional opportunity to build wealth was the Real Estate Investment Trust (REIT) Act in 1960, which was contained in the Cigar Excise Tax Extension.
REIT merged real estate and stock-based investment, giving small investors an avenue to access an investment instrument that had previously been available only to large institutions or high-net-worth individuals.
The act also aimed to encourage REITs through a unique tax status – companies that meet strict, specific criteria as REITs are exempted from contributing income tax on qualifying income.
More than five decades after the REIT Act was passed, REIT.com reports that “the industry has grown to a $1 trillion equity market capitalization and nearly $2 trillion in real estate assets.” That number is from the U.S. alone. Investors around the world are embracing the investment instrument because of the many advantages it brings.

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Bharti Jogia-Sattar is a financial expert who started her career with a real estate institution. For similar articles, subscribe to this website.

The Proper(Ty) Choice: Why Add Real Estate To Your Portfolio

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Any financial advisor would tell you that real estate is integral to any investment portfolio. Despite threats of recession, real estate tends to increase in value, offers a steady cash flow from rentals, and presents investors with tax incentives. As buyers get to pay loans in full, buyers can focus on appreciating the property’s value with the simplest improvement or renovation.

It is also worth noting that this asset type has little correlation with the stock market. As time passes, real estate investments can reduce risk and increase returns in one’s overall investment portfolio. One sound advice is to divide a chunk (capping at 20%) of your risk assets to real estate investment trusts or REITs, both local and foreign.

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REITs often come in index funds and exchange-traded funds or ETFs, and these are the sound choices for new players in the industry. REITs can come in the form of various properties like retail stores, storage units, apartments, offices, hotel rooms, and even hospitals, therefore providing a better range of investment options for your capital.

Real estate assets in the form of REITs are highly recommended as shares of these trusts are easier to sell than any physical property. It thus allows for more liquidity for owners. Unless buyers are looking to quickly and directly own real estate, REITs should be the better option for the present.

Bharti Jogia-Sattar is a financial executive in the greater Los Angeles metropolitan area with a broad expertise in financial and corporate management. To know about her work, visit this website.

Financial Considerations Before Investing In Real Estate

Investing in real estate is by no means easy, even if it has a risk-reward profile that is relatively better than other investment types. Numerous factors must be considered before purchasing a property, namely, location, valuation, and current market trends. There are also financial considerations, such as the following:

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Financial situation

Before pursuing a real estate investment, an individual or organization’s income should be stable first. Picking up a mortgage or paying a sizeable down payment when there is still no financial security at present or in the near future is far from a wise decision. A real estate investment, or any investment, for that matter, should fit the investor’s current situation.

Financial goals

Real estate investments have low liquidity, therefore venturing into it with no clear purpose may lead to unfortunate, unexpected results, including financial distress. The purpose of the investment should be identified first, whether it is for self-use or to obtain profit out of it.

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Financing options

Outright cash payment in real estate purchases is rarely the chosen alternative in transactions. Multiple financing options provide the investor flexibility, the most commonly known are traditional financing through loans, and the subject-to method and seller-carry-back methods. These involve loans that come at a big cost, but leveraging strategies can be applied depending on what best fits the situation.

Bharti Jogia-Sattar is an independent finance and accounting consultant who had previously worked in various industries including real estate. Visit this website for more insights on the real estate industry.