My friend says he invests in REITs....what's that?

One of the best places to invest your money is in real estate. Real estate tends to appreciate over time, can produce predictable cash flows, offer certain tax advantages, and can diversify your portfolio. All good things. One of the problems with investing in real estate is that it can be a headache. For example, if you are interested in buying a rental unit, you probably have to fix it up and lay down at least 20% of the purchase price- all capital drains. There are also closing costs to consider and the hassle of finding good tenants. And I mean "good" tenants! Renters with good credit, who pay you on time and don't go putting holes in your walls and calling you every time the toilet makes a noise! Rent estate can be awesome if done right, but if you want to avoid all the legwork while still being exposed to the benefits of real estate, buying Real Estate Investment Trusts (REITs) could be a great option. A REIT is a company that owns, operates, or finances income producing real estate. It's almost like a mutual fund for real estate investments. You buy and sell REITs on the open market, just like stocks, making them more liquid than the very illiquid process of buying or selling a property on your own. REITs can hold an array of different investments, from apartments to shopping malls. While REITs have the benefit of liquidity, they don't offer much in terms of capital appreciation (like your house does). They also may have high management costs, and dividends are taxed at ordinary income levels. And just like the rest of your stocks, they tend to swing up or down with the general market, providing you less diversification. REITs have outperformed the S&P 500 on the whole over the last 20 years, and are something to consider if you want exposure to more liquid real estate. Consult your financial professional for more information. #wealthtipwednesday #reits #realestate

-Your Friends at Red Oak Financial Group