|REIT Rights and Wrongs |
May not be what you think...
|Common Perception||Why It's a Mistake|
|Just as bond prices move with interest rates, REITs' dividend yields react to interest rate changes in the short term.||Although their share prices may have short-term reactions to interest rates, it has been demonstrated that REITs are correlated to real estate cycles in the long run, not interest rates. Unlike with bonds, common dividends are not guaranteed, and no one is promising to pay back your investment.|
|Mutual funds and REITs are both subject to several requirements (distributions, income/asset tests, etc.) in order to receive an exemption from corporate level income taxes.||Mutual funds are pooled investments in securities, with external administrators. The only decision-making in a mutual fund relates to which securities to buy, hold and sell. By contrast, REITs are living, breathing companies with teams of real estate professionals responsible for implementing corporate strategy. Management decisions include not only which properties to buy, but also whether to develop new properties, leasing and re-leasing space to tenants, positioning properties in their markets, and how to finance those properties, with debt or equity.|
|Source: Louis Wolfowitz|