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Will more investors turn to REITs as the economy grows?

Part of the draw to real estate in New York City is the investment potential. Real estate is one of the few commodities that is not exactly growing in nature; this is because more land is not being produced, and in some areas of our region, land is becoming scarce.

Because of this, what is old is being renovated and being made new again. With that, there are additional investment opportunities. Indeed, industrial investors understand that these opportunities are out there; but for individual investors, real estate (especially commercial real estate) the opportunity may not be financially feasible.

This is why individual investors may pay closer attention to real estate investment trusts (REITs, for short). These are corporations (some that are publicly traded) that are designed to allow individual investors to invest in large commercial real estate projects in the same way they would purchase stock in large corporations. So in essence, an individual investor may purchase an equity interest in a shopping mall project or hospital in the same way he or she would invest in General Mills or U.S. Airways.

Why are REITs important? They offer a way for investors to diversify their portfolios without the typical exposure to risk that comes with corporate investment. They offer competitive long term returns that can compliment those of other stocks, and they typically offer high dividend yields. Additionally, REITs are required by law to pay out at least 90 percent of their taxable income, so investors are more likely to see money come back each year as a result of their investment.

If you have additional questions about REITs, an experienced real estate attorney can help.

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