What are REITs?
A REIT is a type of company that owns—and in most cases operates—income-producing real estate or related assets. Investors can participate in the gains and losses of these real estate assets by purchasing shares of a REIT, often on traditional stock exchanges. REITs offer a liquid method of real estate investing for investors and have special tax considerations that allow it to typically yield high dividends.
REITs are structured as a corporation and thus are not typically taxed at the entity level. Generally, they're required to invest in real assets and derive the majority of their income from real estate activities, including rents from properties and interest from mortgages. 90% of the REIT's annual income must also be paid in dividends which, when combined with a structure that avoids double taxation, allows REITs to typically pay out a higher dividend rate than many equity investments. Keep in mind that dividends received from REIT holdings are taxed as regular income. Learn more about how a Real Estate Investment Trust works.
How do I invest in REITs?
Schwab offers multiple ways to get invested with REITs. Using a Schwab One® Brokerage Account, you can buy shares of an individual REIT, or you can invest in an exchange-traded fund or mutual fund that tracks a broad-based REIT index. Or call us at 877-566-0054 to talk to an experienced specialist about REITs.
