For investors who want to put their money to work
in real estate, but don't have the funds or
time to buy and manage property. There is a
way call the real estate investment trusts or reits,
these companies own finance or manage commercial real estate investors
can buy shares of a wreath that can pay substantial
dividends. In fact, a large portion of american
households are already exposed to reach through mutual funds.
E. T. F. S. Our target
date funds, according to the National Association of Real
Estate Investment Trusts. So joining me now is Jeremy
pagan research analyst at Morningstar. Jeremy. Thanks so
much for coming on the show explain how reits work
. Yeah. Hi Kristen, thank you for inviting
me. And just like you mentioned before reads are
companies that own portfolios of properties and these properties generate
income through rent and capital appreciation. And then that
income is shared among its investors through dividend payouts.
They're typically between 10 and 20%,, 10-20%, very
healthy dividends. And everyone's on the search at Jeremy
for a dividend these days, let's walk through the
pros and cons. How do you separate those and
make an accurate decision when thinking about whether or not
to invest in a reef. Yeah. So some
of the benefits of investing in reits compared to home
owning property is that there's a low cost entry and
it's easy to buy and sell a reits as well
as generating different types of properties um, in your
portfolio from different markets and regions, for example right
now, um investing in Sunbelt Communities has been tremendous
for a lot of people since the pandemic and as
early as 2008 and then some of the cons,
I'm sorry about that. Some of the drawbacks of
reits come with its tax uh deductions, right?
And its tax disadvantages. So if you're a high
income or high I allocation investor, there might be
some tax burdens with reits being taxable as ordinary income
. However, if you hold reits in a traditional
or a Roth ira, which is a tax advantage
retirement fund, you can avoid some of those distribution
tax breaks. Who do you think jeremy would be
the right candidate to invest in a rate? Yeah
. So from our research, the the main beneficiaries
of reach are people that have less time on their
hands are focused on moderate to conservative risk appetite.
So they want steady returns and people who aren't ready
or willing to put down a mortgage. So we
see these people as typically busy professionals, retired individuals
and self employed is now a good time jeremy,
you think to consider investing in a reach if anyone's
interested out there. Yeah. So right now we
see high interest rates and elevated home prices. So
that creates a demand in multi family housing since people
are less interested in buying a home. And so
right now we see a demand in apartment rates and
since reits had a little rough year in 2022,
we see a lot of apartment and residential reits trading
at discounted prices. So, for example, we
see uh, Avalonbay communities and equity residential as to
undervalued apartment reits that people should look out for.
All right, jeremy, pagan research analyst at Morningstar
. I think this is one of the ones that
you mentioned, jeremy, thanks so much for coming
on the show.