REIT

[Buddhastic]

My dh has asked me to research and find one of these to invest in but I am clueless. Can anyone enlighten me on where to start?

From the London Stock Exchange - A Real Estate Investment Trust is a company that owns and manages property on behalf of shareholders. A REIT can contain commercial and/or residential property. REITs provide a way for investors to access property assets without having to buy property directly.

Simple rule for investing - if you don't understand it, don't invest.

No big deal. Some of the largest UK property companies like Land Securities and British Land (they buy, build, manage, rent out and sell offices, industrial estates, DIY sheds etc) converted to REIT status a few years ago because there seemed to be an advantage in the tax treatment.

Since then, commercial property values took a big dip; some property companies went bust, or nearly; and the remaining ones will probably not be converting to REITs because they currently don't see a tax advantage in doing it.

There's nothing wrong with having shares in a REIT as part of your investment portfolio, if you're a person who has an investment portfolio.

It would be unwise to put all your money into commercial property, because you might suffer another enormous drop in value. You would be deluded if you thought you could forecast which would be the big, safe, dependable companies that won't crash (BT, Barclays, Railtrack, Land Securities, Rover, BP?) If you want to research it, I recommend you go to your local library and ask to see their back-issues of Investors Chronicle (a weekly magazine, full of hard-nosed information and advice aimed at the private investor. It doesn't try to sell you anything and has no axe to grind). They do have a website, but the up-to-date articles are subscription-only.

Beware of taking advice from anyone whose next Jag will be paid for by commission.

p.s. if you invest in a REIT inside a self-select Shares ISA, then your ISA account gets a tax rebate on every dividend. So that's the best way to do it.

For example, shares in one of the big REITs were priced at £7.625 on Thursday. They have recently been paying dividends of 56p each four times a year and if you held your shares in an ISA, you would get a 14p tax rebate on each, bringing it to 70p a quarter. You do not have to pay income tax on dividends in an ISA, so you can see it is worthwhile.

god I shouldn't be typing this when I am so tired

I meant 5.6p four times a year (22.4pence per year) but with a tax rebate of 1.4p bringing it to 7p a quarter (28pence per year) if held in an ISA

however the share price can go up, or down, by 25%, or even 50% in a year, so there is risk attached, and you would be wrong to think you can outsmart the market. The share price today is about what it was ten years ago, although at its peak in January 2007 it had gained about 150%

A company that owns lots of office blocks and retail shopping centres will rise and fall as the economy grows and shrinks.

Thanks for your info and time. I have been looking at an American Reit thats just about to release but agree I need to look into this in a much greater detail before I put any money down.

If it's an American company you will be charged US tax, and you will probably not get a tax rebate even if you put it in an ISA.

Usually, REITs and other ITs trade at a discount (i.e. if you add up the value of all their property, and divide it by the number of shares, each share "owns" a greater value than the share costs. However with a new company starting up, you always have to pay the cost of whatever property they are going to buy, plus their start-up costs, commissions to lawyers and investment banks, etc. So it is usually better to buy shares in an IT that is already established and has a good track record.

If you are a US citizen living in the US, you might prefer to buy an American company as it removes risk of currency fluctuations. However if you are not a US citizen, buying one adds this risk.