New federal tax rules create advantage for real estate investment trusts

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As Generation X and millennials inherit their baby boomer parents' assets amid the so-called Great Wealth Transfer, some will look to invest it in rental property to generate income.

These changes, along with the new deductions on REIT income, can mean improved net returns from investing in REIT shares as opposed to direct property ownership. Moreover, the new tax law includes business-tax changes beneficial to REITs and, ultimately, to their investors.

Like stocks, they're bought and sold on major exchanges throughout the trading day. Some REITs own property used for a variety of purposes, but most specialize, variously owning real estate used for apartment buildings, health-care facilities, hotels, shopping malls, commercial office parks and industrial property for factories, on-line retailing fulfillment centers and server farms.

Well-managed REITs pay fairly reliable dividends. However, they can encounter problems resulting in losses being passed on to investors in the form of pummeled share value.To qualify as a REIT under federal rules, entities must pay a minimum of 90% of its profits to shareholders in distributions. Part of this income is in the form of taxable dividends. The rest is return of capital, which is tax-deferred.

Moreover, many direct real estate investors assume that values will rise over time, but this is by no means guaranteed. And even if this happens, the gain before sale might not be enough to compensate for a potential disparity between long-term income and cumulative costs. In this scenario, contrary to what the investor expected, there would be no long-term profit.By contrast, well-managed REITs pay fairly reliable dividends.

 

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Investment real estate is not subject to the salt deduction of 10k. You need to get your facts straight 🤦🏼‍♂️

Who are these baby boomers with assets? I'm not one and I don't know anyone who has any. Must be related to Trump.

This is boring. WE WANT POLITICAL SLOP ON OUR TWITTER FEED!

That sounds like something that would benefit Trump and his holdings. Isn't that ironic.

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