What does a home Inspector Look At?

If the REIT is a Closed-end, it can only issue shares to the public once and can only issue additional shares, which dilutes the stock, if current shareholders approve it. An individual REIT may hold properties only in a specific region, state, or metropolitan area. Open-ended REITs can issue new shares and redeem shares at any time. Although some REITs have a broad focus and invest in a variety of property types in a range of locations, many REITs focus their investments either geographically or by property types.

The preferred method for measuring REIT earnings is called funds from operations (FFO). Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. Net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Essentially, FFO measures a REIT’s operating cash flow produced by its properties, less administrative and financing costs.

If there have been excessive capital gain distributions, this can be a sign that the income is coming from nonrecurring events and will not continue for long. Because many REITs are publicly traded, they offer investors a powerful tool for portfolio balancing and diversification. Stallman, Chris. “REIT Investing.” Teen Analyst. They also provide investors with ongoing dividend income, while offering the potential for long-term capital gains through share price appreciation. Are REITs a good investment? How do bonds work? Yungmann, George and David Taube.

For more information on REITs and related topics, check out the links on the next page. Anyone can buy shares in a publicly traded REIT. How many REITs are there? Three REIT categories include equity, mortgage and hybrid. REITs are corporations that own and manage a portfolio of real estate properties and mortgages. What is a REIT company? ­REITs are part of an extremely diverse industry. Not only are there different categories of REITs, many different property types and classifications can comprise them.

Investing in some types of REITs also provides the important advantages of liquidity and diversity. A company must distribute at least 90 percent of its taxable income to its shareholders each year to qualify as a REIT. And because you’re investing in a portfolio of properties rather than a single building, you face less financial risk. It determined that the best way to do this was the follow the model of investing in other industries — the purchase of equity. Unlike actual real estate property, these shares can be quickly and easily sold. ­REITs­ came about in 1960, when Congress decided that smaller investors should also be able to invest in large-scale, income-producing real estate.