zack childress Real estate investment trust (REIT) has been in existence for nearly 2 decades which helps in managing and buying rent producing asset like office and retail outlets. Properties held by REIT can be sold and reinvested and gains will go the holders. Assessing the property will happen once in 6 months. REIT is more profitable for developers who have invested in commercial properties, private equity funds, also helps the investors to purchase large properties which they couldn’t do with their own resources. The main objective of purchasing a property is that it will appreciate in its value in future and REIT helps in cash flow by providing several ways to earn rental income. REIT is more like stocks and trading having limited liquidity.Zack Childress throws light on REIT as follows.
REIT is preferred because
- Distinguished asset classes and diversified investment
- When economy is good and stable, returns are high
- Developers can launch new projects with the funds raised in REIT’s old projects
- REIT returns are more than mutual funds returns
- High dividends and historical returns
- Income stream for retired people
- Steady payouts
- Ability to use leverage
- Tax benefits
- Publicly traded REIT have high interest rates
- Long term performance
- Select low risk cash flow model
- Legal structure should be assigned properly
- Markets are created and implemented with robust cash flow model
- Fund listing and management
- Determine risk factors before investment
REIT helps you to own portion of real estate (shopping complex, office, and housing) etc and they are volatile in nature.
Types of REIT investments
- Retail REIT investments are very profitable and represented to be biggest investment and if tenants don’t pay them, it may lead to bankrupt.
- Residential REIT own and manage multi-family rental properties, the important factors to keep in mind before investing are population and job growth.
- Healthcare REIT is steadily making progress as every citizen may fall sick at one point of time. They invest on health care units, nursing facilities etc. The profits and benefits earned through this real estate are directly benefited by the hospital management. The customers must be diversified so that you get to invest on different health care systems. The increase in Medicare services reflects the healthcare REIT growth.
- Office REIT investments are mostly concerned with office buildings. The rental income from tenants are usually who have contracts for long terms (Lease).
- Mortgage REIT 10% of REIT investments are from mortgage and it has its own risk involved like when interest rate increase, there is a fall in the mortgage. The money is obtained from secured and unsecured debt offerings. When interest rate increases, the future financing is tougher.
Non-traded REIT is risky and many scams are involved, it is illiquid and not suitable for retired and many fees are involved, acquisition of property in most cases is unknown. If details aren’t provided by your brokers, it can be scam.
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