Is Investing in REITs (real estate investment trusts) a Good Idea?

**Ecacophonix** · 06-02-2007, 01:16 AM

Though I do a fair amount of reading of the real estate market, I must admit that I don't keep in touch with domains such as real estate investment trusts. I understand the REITs (as they are called) could be a very useful addition to one's portfolio, especially for those folks who wish to invest in real estate but are not actually keen on owning a house or real estate! What are the views of the members?

I also read that due to favorable tax laws, REITs generally pay large dividends which appeal to investors looking for income and stability. And because REITs generally do not own single-family homes, they usually do not move in lockstep with the rest of the housing market or the stock market, and so if owns REITs and S&P stocks, when one zigs while the other zags, making the portfolio more balanced.

Now the above is what I read...it will be quite useful to know the feedback from the members if they have had experience investing in REITs..

Thanks for your time

NS from RealPedia

**InRealEstateSolutions.com** · 08-30-2007, 09:48 PM

2 Comments:

First, REIT is not a just a land trust. They're are two different things. A Land Trust is an agreement between a Trustee and a Beneficiary where the Trustee holds title to the property and the Beneficiary holds all beneficial interest inthe property. An REIT is "A company, usually traded publicly, that manages a portfolio of real estate to earn profits for shareholders." Kbadeo, your Land Trust website has nothing to with REITs as far as I could tell.

Second, your site mentions "without violation of lender's due-on-sale clause". One thing to understand about Land Trusts is that putting the property into a Land Trust does not trigger the due-on-sale clause. However, transferring the beneficial interest from the original owner and mortgagor to a new owner or investor, does trigger the due-on-sale clause. Even though the Garn-St. Germain Act does specifically allow putting a property into a trust for estate planning purposes, most mortgages will state that any transfer of beneficial interest in that trust will allow the bank to call the loan due. Putting the property into a trust simply hides it from the bank.

In fact, the Act specifically states "a lender may not exercise its option pursuant to a due-on-sale clause upon a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property".

Or at least that's how I understand and interpret it.

As for REITs... sorry I don't know anything about them more than what I already wrote.

**Rich_in_CT** · 08-31-2007, 08:10 AM

Originally Posted by kbadeo

hey please check our website. It might change your views regarding trusts then give me feedback whether you like the idea or not. Thanks!

Wow, land trusts and REITs.....couldn't be 2 more different topics. In the next thread let's try to bring up lease options and compare them to mutual funds....lol.

On the REIT topic- I prefer to have a firm grip on all of my RE investments, I'd hate to have some other schmuck running things for me. I can get far better gains actively investing than an REIT can bring me. I don't really consider REITs to be real estate investing, they in my opinion are more of a stock portfolio diversification tactic not a direct real estate investing method.

**72places-Dan** · 09-12-2007, 12:34 PM

This is not a good time to get into REITs, according to most investment advisors. Many REITs are seeing staggering losses, and some are expected to implode. Additionally, it is likely the market will fall further before recovering. Whether to invest now really would depend on your investment horizon, but if you're looking to pull a profit within 5 years, I'd recommend you look elsewhere. If you're looking at this for the long-term (15+ years), then this is as good a time as any to get in. It really depends on your individual investment goals.

**jayparmer** · 11-27-2010, 10:49 PM

Originally Posted by InRealEstateSolutions.com

2 Comments:

First, REIT is not a just a land trust. They're are two different things. A Land Trust is an agreement between a Trustee and a Beneficiary where the Trustee holds title to the property and the Beneficiary holds all beneficial interest inthe property. An REIT is "A company, usually traded publicly, that manages a portfolio of real estate to earn profits for shareholders." Kbadeo, your Land Trust website has nothing to with REITs as far as I could tell.

Second, your site mentions "without violation of lender's due-on-sale clause". One thing to understand about Land Trusts is that putting the property into a Land Trust does not trigger the due-on-sale clause. However, transferring the beneficial interest from the original owner and mortgagor to a new owner or investor, does trigger the due-on-sale clause. Even though the Garn-St. Germain Act does specifically allow putting a property into a trust for estate planning purposes, most mortgages will state that any transfer of beneficial interest in that trust will allow the bank to call the loan due. Putting the property into a trust simply hides it from the bank.

In fact, the Act specifically states "a lender may not exercise its option pursuant to a due-on-sale clause upon a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property".

Or at least that's how I understand and interpret it.

As for REITs... sorry I don't know anything about them more than what I already wrote.

I'm curious, where to most investors get MLS information to study properties? Do you use an agent, are you an agent, or do you get this information from anywhere else?

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