2014-03-06 00:52:03 - Real Estate Investment Trusts REITs - Industry Analysis - a new market research report on companiesandmarkets.com
Real Estate Investment Trusts (REITs) were created by the United States Congress in the 1960s, giving individuals the opportunity to invest in large property businesses. There are currently more than 150 publicly traded REITs in America. Since 2001, REITs have resided in the Standard & Poor´s 500 index, gaining in popularity with individual and institutional investors. Some regulations, as outlined by the Internal Revenue Service, apply to these investments. Prominently, REITs must invest at least 75% of their assets in real estate and distribute 90% or more of annual taxable profits, as dividends, to shareholders. Many REITs invest in different types of properties, offering investors a fair degree of diversity. REITs invest in categories, such as
shopping centers, office buildings, or apartment units. However, some have specialized portfolios, which may entail, for example, healthcare facilities, industrial properties, hotels, and self-storage buildings. A prudent investment strategy is to purchase several REITs dealing in different business categories. Most important, a REIT´s revenue is dependent on its occupancy rates and ability to raise rents. Revenue may include management revenue and/or fee income related to development efforts. Investors should note that during a difficult demand period, competition among landlords can lead to the granting of costly concessions, such as free rent and space improvements. Rental revenue does not advance quickly, since low tenant turnover and rate-hike limitations temper the pace. Nonetheless, renovations and upgrades can attract well-heeled tenants. Also, many REITs expand the top line via acquisitions or development efforts. A crucial consideration for prospective investors is a trust´s ability to effectively manage its construction pipeline.
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