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Home > Real Estate Investing > Why Real Estate?

Why Real Estate?

INVESTING IN COMMERCIAL REAL ESTATE

Investors looking to diversify their portfolios while contributing to stable, long-term income and asset growth have a number of options. Stocks, bonds and cash equivalents are the most common investment choices.  Real estate should be considered the fourth asset class.

  • Stocks: shares of ownership of a company
  • Bonds: long-term debt obligations of governments or corporations
  • Cash Equivalents: currency, bank accounts, money markets, certificates of deposit
  • Real Estate: land and buildings

Incorporating commercial real estate into an investment portfolio has the potential to diversify, reduce risk and enhance returns, while also providing both income and capital appreciation.

WAYS TO INVEST

Real Estate Investment Trusts (REITs) were first created by Congress in 1960 to provide a tax efficient means for individuals to invest in commercial real estate. Individuals can invest in commercial real estate through either direct ownership of real property or an investment in real estate securities, i.e. stocks, bonds, mutual funds, or REITs. Owners of commercial real estate are able to depreciate the value of property improvements over time. This depreciation expense can be used to offset ordinary income and reduce income tax.

REITs must:

  • Invest a majority of assets in real estate
  • Derive a majority of income from real estate
  • Distribute at least 90% of taxable income to shareholders in the form of dividends

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