REITs are investments that you can’t overlook because they have facets such as huge dividends and substantial holdings in the real estate market that make them a tremendous asset. There’s a lot of things to know about the way they work, but you also should get to know a little of their history. Finding out how they started can help you understand why their current market has been booming.
REITs Were Established About 60 Years Ago
Oddly enough, REITs came about as part of an amendment to an already existing tax law, the Cigar Excise Tax. That law, which has been around since about the beginning of the nation’s founding, was extended in 1960 when Congress introduced the formation of several other corporate tax codes, but it also legalized the formation of real estate investment trusts (REITs). When then President Eisenhower signed the bill into law, it became yet another hallmark of his accomplishments that included the interstate highway system, and the forming of NASA. That same year that this new investment vehicle was legalized, the National Association of REITs was formed which has since been the main voice and chief advocate of publicly traded REITs, and they help ensure financial laws passed will benefit both holding companies and investors. Fast forward to today and the top REITs 2019 have become the investments to look at for tomorrow.
What The 1960 Law Accomplished For REITs
REITs became a very important investment because unlike stocks which may or may not pay dividends out, REITs are required to pay out 90℅ of their income to shareholders. This allows them to enjoy tax exempt status from corporate taxes, and investors are usually only taxed at the capital gains rate per the dividend. However, it’s also possible for an REIT dividend payment to be a distribution of its return of capital instead of a return of income which means any dividends paid as such are exempt from all taxation.
Advantages Of REITs In 2020
The real estate market took a hit in 2008 (the movie Big Short has explained what happened beautifully with the story of 3 men who became rich by betting on the housing market to short because the mortgages had not been paid for such a long time it was ridiculous) when overvalued properties took a sudden downturn and the real estate market took a hit to its reputation. Yet REITs have stayed as a sought after investment as the real estate sector has stabilized, and one benefit they have going is that they’re not usually tied to the ebb and flow of the stock market. Like all other investments, REITs have their own risk factors, but if you know where to find the top REITs 2019 and into 2020, your portfolio can benefit greatly from their diversification. Some of the top REITs to look at in 2020 include retail space anchored by grocery stores who can compete with Amazon, coworking space office properties and senior care housing community based Reits.