Secret Of The Millionaire Mind . . . Yes, You Can Box It Up!
There are two ways to build wealth . . .
One is through traditional retirement savings, and the other involves accumulating assets so large that your inflation-adjusted net worth grows, even if you don't make a dime. Billionaires and Wall Street titans often do this with real estate — owning 10 or 20 units of expensive property in places like London, New York City, and Hong Kong. Then, owning a few dozen properties around the world, they leverage those assets to build even larger piles of cash.
But there's another way that wealthy folks like these have amassed their fortunes, and I'm going to talk about it today: real estate investment trusts (REITs).
In short, REITs are businesses that own large portfolios of commercial buildings. They are different from the real estate you and I own. For example, if you own a condo, you're a "part owner" of the building. That is, you don't own the underlying property — only a percentage (and usually very small) share of it.
You might be surprised how many millionaires own REITs.
The average millionaire owns about $750,000 worth of REITs. That's 7.5% of their total net worth, and it's a significant part of how they got wealthy.
People like me, who have owned REITs for more than 25 years, absolutely love them. They're one of the best wealth-building tools in our financial arsenal.
What are REITs?
REITs are all about ownership. Instead of owning just the building in which you live or work, you can purchase shares in a company that owns hundreds or even thousands of buildings across the country. This gives you a lot of money. If a REIT earns $3 in rent on each square foot, which is typical for a Class A office building, it will earn you $1 million if you own 100 shares.
REITs have several advantages over owning the property right in front of your eyes:
• You defer capital gains taxes. Because the income that a REIT generates typically isn't taxed until it's paid out to shareholders, your taxable income and capital gains are usually low or nonexistent.
• You get a little interest income. A REIT returns part of the rent it collects to its shareholders as "dividends." The payments are typically limited, but they're still tax-free.
• You own thousands of properties. The average non-REIT office building has about 70 tenants, so you might own 100 or more buildings across the country in total. That's three or four times the assets you currently have in the real estate market!
• Your portfolio is diversified . . . but not all at once. Diversification is a terrific way to reduce risk, because if one asset class tanks, you don't lose too much. But the average person can't invest in thousands of properties at once . . . and even if he could, he'd have to hire a small army of real estate brokers and managers to do it.
• You get paid on time. Sometimes landlords take a while to send us rent checks. With a REIT, you get paid on time every month.
• You get professional management. Although you're a part-owner of the company, you don't have to do all the grunt work yourself. The company will hire managers, buy new buildings, fix up properties and everything else associated with running a real estate empire.
• You can invest in your industry — at a discount. Because REITs are typically trading at discounts to their net asset values (NAVs), savvy investors can get even more assets for their money.
These are all great reasons to consider REITs.
Source: http://millionairemind.com/reits.htm
12 tips on how to start with REITs: 1. Invest in the companies you know and trust Do your homework before buying a REIT and learn how it works, track its performance over time, analyze its balance sheet, understand what it owns and how much income it can generate. 2. Buy the right shares Do not buy at a great price just because it has gone up 15% in a month, or because you saw your friend with the same asset buying and buying and buying with no result and have no idea what to do. 3. Assess diversification To get the most from REIT investments, you need to diversify across different types of REITs with different asset classes such as commercial real estate, retail and industrial. 4. Ignore the short term You must not be fooled by short-term performance and "chart" following investment strategies or greedy adviser intentions. 5. Monitor Your investments 6. Look for good managers 7. Know who your partner is Who is your REIT? How long have they been in business? 8.
Conclusion: If you are a global person then REITs are a good choice for you to invest in. Prices of Reits around the world will be affected by real estate and hence, it is an advantage for global investors who can strike a balance between the prices of REITs across different countries in different regions.
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