REITs vs. Buying Property: Knowing all the Angles

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REITs vs. Buying PropertyKnowing All the Angles
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Investing in Real Estate
Real estate investment is a time-honored way to
protect and increase wealth. There are a number
of ways you can invest in real estate, including
buying property directly or purchasing shares of
a real estate investment trust, or REIT. Each
method has advantages and drawbacks, and the
educated investor will study the pros and cons
closely before making a choice.
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  What Is An REIT?
The concept of purchasing a home and either
renting it out or holding onto it is fairly
straightforward, but an REIT is a less well-known
option. REITs are essentially traded securities
that represent real estate development, holding
or sales companies. These securities provide
special tax benefits and must satisfy stringent
requirements to qualify as REITs. To invest in an
REIT, investors may purchase shares of a specific
real estate company such as a property developer
or an ETF that holds shares in a variety of REIT
businesses. Purchasing shares in an ETF allows
you to reduce risk by spreading your investment
around several companies.
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  Why Choose An REIT?

• There are a variety of reasons why investors may
  feel that an REIT is the right investment for
  them, including
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• Less up-front cash needed. To purchase
  properties, you typically need at least 10,000
  up front for down payments and to satisfy closing
  costs and associated costs. REIT investors can
  get in for much less.
• When you purchase real estate, you often take on
  a mortgage to pay for the property. REIT
  investment requires no debt.

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  Advantages of REITs (cont.)

• There are a variety of reasons why investors may
  feel that an REIT is the right investment for
  them, including
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• Liquidity. Real estate can be tough to unload
  when you need cash. Selling shares of REIT is as
  easy as selling stocks in a company as REIT
  shares are traded daily on markets.
• Less hassle. When you invest in an REIT, you
  dont have to deal with the headaches of being a
  landlord maintenance, late night calls, finding
  tenants, etc.

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  Why Choose Traditional Real Estate?

• Traditional real estate investing also provides a
  number of advantages that investors should be
  sure to consider before making a choice, such as
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• Leverage and amortization. By making a 10,000
  down payment, you can purchase a 100,000
  property that you can use the rents from your
  tenants to pay off. Long-term, investing in
  property may be more profitable than REIT
  investing.
• Careful monitoring. When you purchase property,
  youre in greater control of your investment than
  you would be if you purchased an REIT. REIT
  shareholders dont have as much say so over the
  companies they invest in as property owners have
  over their houses and other buildings.

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  Advantages of Traditional Real Estate (cont.)

• Tax benefits. Owning property allows you to
  deduct many costs such as mortgage interest,
  repairs, etc. on your taxes, which can be helpful
  when April 15 rolls around.

• Steady costs. Over time, you may be able to
  charge higher rents, but your mortgage payments
  will stay the same, increasing the profitability
  of your property.

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