Educated REIT Investing

The Ultimate Guide to Understanding and Investing in Real Estate Investment Trusts

Stephanie Krewson-Kelly, Glenn R. Mueller, Merrie S. Frankel, Calvin Schnure

• Publisher: Wiley
• Year: 2020
• ISBN:
  9781119708711
• Edition: 1
• Topic: Business
• Subtopic: Investments & Securities
• Index: Business

Learn to invest in REITs with confidence and skill with this powerful resource

Educated REIT Investing is the ultimate resource for investors, financial advisors, and students interested in learning how to invest in real estate investment trusts (REITs)—one of the only asset classes to significantly outperform the S&P 500 Index over the last 25 years.

Written by Stephanie Krewson-Kelly and Glenn R. Mueller, PhD., both accomplished REIT authors and investors with six decades of accumulated industry experience between them, Educated REIT Investing provides all the basics and history, then blends pragmatic strategies and advice with a thorough exploration of the fundamentals and nuances of the REIT industry. Topics include:

• Basic information about REITs and the REITs industry
• Terminology specific to the REIT industry, explained in plain-English
• Historical REIT industry performance tables and trading perspectives
• Analysis and equations needed to calculate key metrics used to identify the suitability of companies for investment purposes, illustrated with simple examples

This book is perfect for anyone looking for a straightforward, easy-to-understand resource to establish or improve their understanding and analysis of real-estate investment trusts.

PART I
AN INTRODUCTION TO REITs

Part I of this book begins with very basic information that will be helpful to individuals who have little or no prior knowledge of REITs. Chapter 1 addresses industry size, the different ways REITs are classified, and online resources for learning more about the industry and individual companies. Chapter 2 provides an overview of the benefits of investing in REITs, followed by a discussion of real estate fundamentals in Chapter 3. Chapter 4 discusses REIT dividends in great detail, including how to calculate the current yield and the yield on cost, ways to quickly assess if a dividend is safe, and how dividends generally are taxed at the investor level. Chapter 5 provides an overview of different lease structures associated with various property types that REITs own, followed by a discussion in Chapter 6 of the property sectors and subsectors REITs own and that Nareit^® tracks. Chapter 7 discusses mortgage REITs in detail.

These first seven chapters are designed to provide foundational information about real estate as an investment asset, REITs that own different types of real estate, and REIT dividends. The chapters that compose Part II of the book build upon this fundamental knowledge and address the more technical aspects of analyzing and investing in the common shares and fixed income securities that REITs issue.

CHAPTER 1
What Is a REIT?

A real estate investment trust (REIT, pronounced “reet”) is an entity that receives revenue through owning or financing income-producing property. Similar to other industries, REITs can be private organizations, public but non-traded, or they can be publicly traded on a stock exchange. (Chapter 8 compares the benefits of publicly traded REITs versus private and public non-traded REITs.) By being publicly traded, REITs are similar to mutual funds that are accessible to all investors, who can benefit from receiving real estate income without purchasing, managing, or financing property directly.

Publicly traded REITs are bought and sold like the stock of any other public company. Unique to REITs, however, is their tax status. The Real Estate Investment Trust Act of 1960 legislation that created the REIT structure exempts companies that qualify as REITs from paying corporate income tax (just like mutual funds), provided they distribute their taxable income as dividends. To qualify as a REIT in the eyes of the Internal Revenue Service (IRS), a company must meet many specific criteria. The most widely known provision is that a REIT must pay shareholders a dividend equal to at least 90% of what would otherwise be taxed as ordinary income. (Chapter 8 highlights the fundamental technical hurdles companies must clear to qualify for REIT tax status.)

Nareit^® (formerly known as the National Association of Real Estate Investment Trusts...