Q; I am a 31-year-old accountant interested in investing in REITs. I’ve read a few articles on them but I still need help. Is this a good idea?
— C. Ellis, Via the Internet
A: A real estate investment trust is broadly defined as a company that pools investor dollars for the purchase and management of real estate properties and/or mortgage loans. There are nearly 200 REITs you can invest in, and they specialize in buying, selling, and developing different types of property — malls, apartments, office buildings, and hotels, for example. They have the diversification of mutual funds but can be traded like stocks.
REITs are a very good investment to consider, even as there is concern over the housing bubble. Equity REITs have been among the best performing long-term investments, gaining 22.56% from 1999 to 2004, outperforming the S&P 500 Index and the Dow Jones Industrial Average. By law, REITs must pay at least 90% of their taxable income to shareholders as dividends, which increase the total return investors receive.
Since the housing market is cooling, you shouldn’t expect the same level of performance from REITs in the short term. But over the long term, they are a solid investment. To find out more about REITs, go to the National Association of Real Estate Investment Trusts Website at www.nareit.com. Websites such as Morningstar.com and Yahoo! Finance also have articles about how REITs can fit into your portfolio.