Are All Reits Registered With Sec

Aug. 30, 2016

The SEC's Office of Investor Education and Advocacy is issuing this bulletin to brainwash investors near investing in publicly traded REITs.

What are REITs?

A REIT, or real estate investment trust, is a company that owns – and typically operates – income-producing existent estate or existent estate-related assets. The income-producing real manor assets endemic by a REIT may include existent assets (due east.g., apartment or commercial buildings) or real estate-related debt (eastward.g., mortgages). Most REITs specialize in a single blazon of real manor – for example, flat communities. In that location are retail REITs, office REITs, residential REITs, healthcare REITs and industrial REITs, to name a few.

What are publicly traded REITs?

Publicly traded REITs (also called exchange-traded REITs) have their securities registered with the SEC, file regular reports with the SEC and their securities are listed for trading on an exchange such as the NYSE or NASDAQ. As with whatsoever stock listed on an exchange, yous can purchase and sell the stock of a publicly traded REIT with relative ease. An investment in publicly traded REITs is typically a liquid investment. Real-time market prices for the shares of a publicly traded REIT are widely bachelor to the public.

In contrast, in that location are also non-traded REITs whose securities are registered with the SEC, file regular reports with the SEC, but their securities are not listed on an substitution and are not publicly traded. Because non-traded REITs are not publicly traded, there is no readily available market price for the stock of a non-traded REIT. An investment in a non-traded REIT poses risks different than an investment in a publicly traded REIT.

Chart comparing REIT types

	Publicly traded REITs	Non-traded REITs
Overview	REITs that file with the SEC and whose shares trade on national stock exchanges.	REITs that file with the SEC just whose shares do not merchandise on national stock exchanges.
Liquidity	Shares are listed and traded, like any publicly traded stock, on major stock exchanges. Near are NYSE listed.	Shares are not traded on public stock exchanges. Redemption programs for shares vary past company and are limited. More often than not a minimum property period for investment exists. Investor exit strategy generally linked to a required liquidation later on some period of fourth dimension (frequently 10 years) or, instead, the listing of the stock on a national stock exchange at such time.
Transaction costs	Brokerage costs the same equally for buying or selling whatsoever other publicly traded stock.	Typically, fees of x-15 per centum of the investment are charged for broker-dealer commissions and other up-forepart costs. Ongoing management fees and expenses also are typical. Back-end fees may be charged.
Management	Typically self-advised and self-managed.	Typically externally brash and managed.
Minimum investment amount	One share.	Typically $ane,000 - $2,500.
Performance measurement	Numerous independent functioning benchmarks available for tracking listed REIT industry. Broad range of analyst reports bachelor to the public.	No contained source of performance data bachelor.

Source: National Clan of Real Estate Investment Trusts (NAREIT)

Private REITs. In improver to publicly traded REITs and not-traded REITs, there are also private REITs. Similar to non-traded REITs, private REITs are not listed making them hard to value and merchandise. Private REITs too do not regularly file regular reports with the SEC possibly making it difficult for you to keep informed of your investment. Instead, private REIT offerings are individual placements and rely on an exemption from the obligation to register with the SEC. Investors are typically limited to accredited investors.

Why exercise investors invest in REITs?

Real estate as role of an investor'southward portfolio. Investing in actual existent manor backdrop tin be an expensive investment selection. By investing in REITs, many investors find that a REIT investment allows them to diversify their investments to include existent manor without having to incur the fourth dimension and money commitment necessary when investing in actual real estate.

Regular dividend payments. Because of the rules by which REITs are established, REITs accept to distribute at least 90 percentage of their taxable income for the year. Because REITs ofttimes generate income based on the regular rents received on their belongings holdings, this requirement to distribute income may outcome in regular dividend payments that income-seeking investors may find bonny.

No double taxation. REIT investments do not incur the double revenue enhancement that can frequently affect an investor's return in a typical operating visitor. For REITs, the income that is distributed to investors is not taxed at the entity level. Rather, that income is only field of study to taxation when investors receive the REIT distribution and report the income personally. A typical operating company, on the other manus, has its profits taxed at the corporate level so at the investor level when these profits are distributed equally dividends to investors. Of form, tax on any investment income whether from a REIT or other investment may be deferred if the investments are held past the investor in a taxation-deferred account such as an individual retirement account.

Non Qualified Dividends. Another thing to note is that REIT dividends practice non typically authorize as and, therefore, do non receive the favorable taxation treatment accorded to qualified dividends. Depending on your tax state of affairs, qualified dividends are dividends that run across certain criteria to be taxed at the lower long-term uppercase gains revenue enhancement rate rather than the higher ordinary income tax rate. Please consult your taxation advisor regarding your individual tax circumstances.

What to consider when investing in publicly traded REITs?

Different types of investments. Investing in publicly traded REITs offers investors an opportunity to include existent manor as part of an investment portfolio. Not all publicly traded REITs are alike, all the same. Publicly traded REITs often specialize in 1 particular type of existent estate belongings. Understand the different types of real estate properties before investing in REITs.

For instance, there are office REITs that focus on the conquering, development, management and leasing of commercial office properties. Industrial REITs do the aforementioned with industrial warehouse and distribution properties. The value and rents earned for these REITs are significantly tied to spending by businesses. On the other hand, the value and rents earned for retail REITs that focus on retail properties and residential REITs that focus on housing are more closely tied to spending by individual consumers. REITs can be even more specialized as to focus on a single type of property, such as self-storage centers or information centers just.

There are too REITs that invest in mortgages. Mortgage REITs provide coin to real manor owners and operators either direct in the form of mortgages or other types of real manor loans, or indirectly through the acquisition of mortgage-backed securities. Mortgage REITs tend to be more leveraged (that is, they use more borrowed capital) than REITs that are focused on backdrop. In addition, many mortgage REITs manage their interest rate and credit risks through the use of derivatives and other hedging techniques. In that location are investment risks to these leveraging and hedging strategies, and to learn more you should review the run a risk factors in the latest Form ten-M filed by the mortgage REIT.

Interest charge per unit sensitivity. REIT investments may be sensitive to a changing interest charge per unit environs. Different REITs may be affected differently. When interest rates increment, some REITs may experience an increase in rent rates or mortgage rates. Other REITs, however, may feel higher acquisition costs, similar to when a homebuyer is affected by college mortgage rates when ownership a home. Considering some investors observe REITs attractive for their dividend yields, REITs may become less attractive for those investors every bit investment alternatives such as savings accounts and certificates of deposit increment their rates.

Conflicts of involvement. Publicly traded REITs are ofttimes managed by their own employees. Even so, as typically found in nontraded REITs, some publicly traded REITs may hire external managers to manage their investments and operations. The external managing director may be paid significant transaction fees by the REIT for services that may not necessarily align with the interests of shareholders, such equally fees based on the amount of property acquisitions and assets under direction. In addition, the external managing director may manage or be affiliated with other companies that may compete with the REIT in which y'all are invested or that are paid past the REIT for services provided, such as property management or leasing fees.

Prudent investing. As with any investment, yous should take into account your ain financial situation, consult with an investment professional and perform thorough research before making any investment decisions apropos REITs. You lot tin review publicly traded REIT'south disclosure filings, including annual reports and quarterly reports and any offerings prospectus using the SEC'southward EDGAR database. At that place are also REIT-focused mutual funds and exchange-traded funds to consider.

Additional Information

For more information about non-traded REITs generally, meet our Investor Bulletin.

Also see FINRA's investor alert about non-traded REITs.

For more information about private placements, see our Investor Bulletin.

For more information almost accredited investors, see our Investor Bulletin.

For more data about Form 10-M, see our Investor Bulletin.

For information on how to search for visitor documents, such as Forms eight-Chiliad, in the SEC'south EDGAR database, meet Using EDGAR - Researching Public Companies.

For some other resource for using EDGAR, run into Researching Public Companies Through EDGAR: A Guide for Investors.

Visit here for more information nigh mutual funds.

For more data nigh exchange-traded funds, run into our Investor Bulletin.

For information nigh how fees impact your investment, see our Investor Bulletin.

To acquire nigh how to research your investment professional, see our Investor Message.

For our Investment Adviser Public Disclosure (IAPD) website, visit adviserinfo.sec.gov.

For FINRA's BrokerCheck, visit brokercheck.finra.org.

To locate contact data for your state securities regulator, visit nasaa.org.

For additional investor educational data, visit the SEC'southward website for private investors, Investor.gov.

The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.