Over the past several months, we have talked to many of our clients about their accounts. There’s one message we continually hear: “I am tired of low interest rates on my money!” As we searched diligently for an investment that would have potential for income and dividend gains with limited market risks, we found such an investment: REITs (pronounced REETS), or Real Estate Investment Trusts.

These investments are governed by a board of directors and may be publicly traded on a major stock exchange in the same way shares of a corporation’s stock are traded. Just like other publicly and privately offered companies, REITs must provide investors with a prospectus, annual reports and other periodic updates. These investments are not for everyone. With privately held REITs, there can be some restrictions such as not being as liquid as publicly traded investments.

That being said, why would you or anyone want to invest in a privately held REIT?

• REITs allow smaller investors to own large income-producing real estate.
• REITs pay non-guaranteed quarterly dividends (currently 7%) which are often used as an additional source of income.
• REITs collect their income from corporations first. Corporations are obligated to pay operating expenses such as rent, salaries, taxes and utilities FIRST before any interest or dividends are paid to bondholders or stockholders.
• REITs can further diversify a portfolio, which can offer the potential for reducing the overall portfolio risk and higher returns.

We think this may be an appropriate investment for some people, but not everyone. This investment requires a time commitment, and there could be a waiting period for withdrawing your money.

We have found what we believe to be one of the most conservative REIT firms on the market today. If you are concerned about today’s low interest rates and want to look at some alternatives, please feel free to call us at 800-559-2900 and ask for the REIT information packet, which will include a current prospectus.

Better yet, make an appointment so we can explain this investment to you in person. It’s very easy to understand if we can sketch it out, but it’s a bit difficult to do over the phone. We look forward to speaking with you soon.

Bruce Fenton is a financial consultant, a writer, and the Managing Director of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.

Note: There are special risks associated with real estate investing, and it may not be suitable for all investors. REIT investments should be made as long term investments. Volatility is potentially increased by investing in a portfolio solely of real estate securities. A prospectus detailing all risks, fees, and expenses is available for review from your investment consultant. Past performance is no guarantee of future results. Dividends are not guaranteed and, if paid, will fluctuate in rate.