A REIT, or real estate investment trust, is an entity that holds a portfolio of commercial real estate or real estate loans. It is said to be a truly passive real estate investment. In today’s podcast, Bill takes a look at what exactly a REIT is, the various types, pros and cons and how you go about investing in one.
The real estate investment platform Groundfloor launched its first mobile app Wednesday that combines the concept of traditional savings accounts with real estate investing.
The Stairs app allows investors to deposit as little as $1 and earn an annual interest rate of 4%-6%, according to a Groundfloor press release.
How It Works: Funds deposited through the app are invested into a pool of loans secured by real property. Interest accrues daily and is paid to investors every five days. Investors can also withdraw money at any time without paying any fees or penalties.
While in beta, nearly 2,700 users invested more than $4.5 million with the Stairs app.
Groundfloor’s goal with the Stairs app is to simplify the world of alternative investing by combining the simplicity of traditional savings with the benefits and higher yields of real estate investing. The company refers to this new concept as “savesting.”
About Groundfloor: Groundfloor is a real estate investing platform that allows non-accredited investors to purchase shares of high-interest, short-term loans made to real estate investors and homebuilders. Groundfloor was the first company qualified by the U.S. Securities & Exchange Commission to offer direct real estate debt investments via Regulation A.
To date, investors on the Groundfloor platform have earned nearly $12.7 million in interest with total returns averaging 10.5%.
A REIT (pronounced REET), or real estate investment trust, is an entity that holds a portfolio of commercial real estate or real estate loans. Congress created REITs in 1960 to provide all investors, especially small investors, with access to income-producing commercial real estate. REITs combine the best features of real estate and stock investment.
This guide will walk you through everything you need to know about real estate investing through REITs, including the types of REITs, REIT pros and cons, how to invest in REITs, and what qualifies a company as a REIT.
There are several types of REITs. Let’s start with classifying REITs by access:
Pros: Investing in REITs has several benefits, including:
Cons: However, REITs also have some drawbacks, including:
Investors have many ways to invest in REITs. They can buy shares of publicly traded REITs through their brokerage account. An investor could purchase a diversified REIT or invest in several different REITs to build a diversified portfolio. Another way to invest broadly across the REIT sector is to buy a mutual fund or exchange-traded fund ( ETF ) focused on REITs. Finally, you can invest in public non-traded REITs through a financial advisor or a real estate crowdfunding portal.
Companies must meet specific criteria to qualify as a REIT, which receive special tax treatment so they don’t pay corporate income tax. These qualifications include:
Congress created REITs so that anyone could own income-producing real estate. Because of that, they’ve become a great way to earn dividend income. Add in their diversification benefits and historical returns, and REITs can be an excellent investment option.
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