When it comes to investment choices, the hardest part seems to be choosing which options to actually, well, choose. You’ve got to gauge how much of risk you can take on, and what your investment horizon looks like.
Today, we’ll take a look at an option that allows you to diversify your portfolio while adding a bedrock of stability.
REITs—aka real estate stocks—are ideal targets for investors who want a steady stream of income. By IRS law, REITs are required to pay out 90% of its earnings in dividends—great for the income investor.
Although there are various REITs (pronounced “reet”), the variety might confuse a regular investor. Here’s where investing in REIT ETFs (exchange-traded funds) can almost save a passive investor.
The REIT ETF…
An ETF is a pooled investment vehicle and offers diversified exposure to investors across asset classes. Investors can buy ETF shares that represent a proportional interest in the pooled assets.
Here are four REIT ETFs with a dividend yield of 4-8%.
REITs have historically been a high-yielding asset class compared to standard stocks on the Standard & Poor. KBWY capitalize on this by targeting REITs with high dividends, allowing this ETF to pay out a generous 7.2% a year.
Its top holdings include Washington Prime Group [WPG], Government Properties Income Trust [GOV], New Senior Investment Group [SNR], Global Net Lease [GNL] and Whitestone REIT [WSR].
Dividend: 7.2%
Market cap: $252.86 M
Expense ratio: 0.35% ($35 for every $10,000 invested)
VNQ offers wide exposure to property trusts in the United States and covers over 65% of the entire US REIT market value. Due to this insane diversification of stable assets, the dividend is a little lower—but it’s well worth it for the investor who wants to sleep at night.
Top holdings include American Tower [AMT], New York-based Simon Property Group [SPG], Crown Castle International [CCI], Prologis [PLD] and Equinix [EQIX]—a combined total of close to $250 B in market cap, which altogether accounts for 22.4% of the ETF.
Dividend: 4.2%
Market cap: 33 B
Expense ratio: a ridiculous low 0.12% ($12 for every $10,000 invested)
The MORT ETF invests in mortgage REITs. In the case of mortgage REITs, firms borrow capital to invest in MBS (mortgage-backed securities) or mortgages. These REITs make money off the interest rate spread.
The top holdings include Annaly Capital Management [NLY], AGNC Investment [AGNC], Two Harbors Investment [TWO], New Residential Investment [NRZ] and Starwood Property Trust [STWD] that account for 43% of the ETF.
Again, this one yields on the lower side of the spectrum. This bad boy provides international exposure, which means added diversification. Approximately 40% is allocated to international holdings.
Top holdings include Simon Property Group [SPG], Prologis [PLD], Public Storage [PSA], WFD Unibail Rodamco and Digital Realty Trust [DLR].
Investing in real estate can be a great way to grow your wealth, but did you know that you can use your IRA to invest in real estate? An IRA (Individual Retirement Account) is an investment account funded with pre-tax dollars and can be used to purchase investments such as stocks, bonds, or even real estate. Here’s what you need to know about using your IRA to invest in real estate.
Rules & Regulations
First and foremost, specific rules and regulations must be followed when using an IRA to invest in real estate. You must adhere to IRS guidelines regarding the types of investments allowed and how much you can contribute each year.
The most important rule is that you cannot use the funds for personal benefit; any money used for personal benefit will be subject to tax penalties.
Additionally, it’s important to note that the money in your IRA must be invested into a qualified trust company or custodian before it can be used for any investment, including real estate.
Benefits of Using an IRA To Invest In Real Estate
One of the major benefits of investing in real estate through an IRA is that all profits from the investment are tax-free until retirement age.
This means any profits gained from rental income or appreciation won’t have to be reported on taxes until you withdraw them at retirement (typically 59 ½ years old). Additionally, since a traditional or Roth IRA allows for up to $5000/year ($6000/year if over 50) contributions without triggering taxes on those amounts, this could provide more capital than if investing with after-tax dollars alone.
This could give you more buying power when looking for a piece of property and create larger returns down the road with compounding interest.
Drawbacks of Using an IRA To Invest In Real Estate
There are some drawbacks associated with investing in real estate through an IRA, such as using the money after retirement without incurring taxes and penalties on withdrawals before then.
Additionally, IRAs typically have higher fees than other investments because they require custodians or trustees who charge annual fees for managing the accounts. Also, since IRAs can’t borrow money against their assets or partner with outside investors, acquiring larger properties is challenging due to the limited capital resources available through an IRA account alone.
With proper research and planning, investing in real estate through your IRA may help increase your wealth while avoiding taxes on those profits until retirement age making it a potentially attractive option for many investors who want access to capital without being taxed prematurely.
I was looking around Google for an old article on tax strategies and this five-year old video of myself happened to pop up.
I’m interviewing a tax expert about how real estate investors avoid paying taxesin perpetuity—AND how everyday citizens can do the same thing.
(Real estate—our TEMPLE I and TEMPLE II projects included—has a number of tax benefits savvy investors have capitalized on for years, including Opportunity Zone breaks and 10-year tax abatements.)
There’s the 1031 exchange, of course, which I’ve shared with you guys before.
Just to refresh your memory, the 1031 Exchange allows you to roll over gains from your last project into a new property TAX FREE—as long as said property is worth the same or more.
But there’s ANOTHER TAX LOOPHOLE that can take your portfolio to an entirely new level by splitting your capital gains into MULTIPLE properties.
PS: In our next update, I’m going to break down how real estate moguls get paid from their properties…tax free. 👀 PPS: If you want to learn how to implement generational wealth strategies like this one, you can join our NYCE wealth academy (TRIBE U) here.
If there’s anything the pandemic taught us, it’s that the paradigm of “office” and “workspace” has been shaken to its CORE.
Universities are teaching via Zoom, court dates are done virtually, FULLY REMOTE businesses are valued at $1B+, and legitimate Inc. 5000 startups are run from…wherever. 📲
This is my office for the day…
I am actually running our business from the beach, typing this from here.
It’s 4:28 pm CET, which means it’s 10:28 am EST and I am CRUSHING my to-do list.
(And the team will continue to crush it while I’m asleep. That’s the 🗝)
Having team members in all the main time zones gives us a 24-hour work cycle vs. 9-5/eight-hour on-the-clock performance.
This means we get 3x the productivity of a similar company. 🔥
Let me repeat that…3x PRODUCTIVITY vs. our competitors.
Meanwhile our project management software grants us 24-hour TEAM-WIDE connectivity that tracks all tasks and lets us know if productivity dips even a little bit.
There is ALWAYS someone senior awake. It could be Martin in Barcelona…Nat in New York…Vineet & Arif in New Delhi.
Well, the first step is to have an actual side hustle you’re launching. Not just an idea, a validated business.
MAJOR KEY: Do NOT spend money until you’ve made your FIRST DOLLAR! 🗝🗝🗝🗝
(You can catch a replay Business Launch masterclass here and see TRIBE member Nessa launched her business on the spot and got her first $45K client shortly after.)
One of the easiest ways to start is with Airbnb—you can start that in 10 minutes. Literally. (Here’s a guide if you need it.)
Once you have your business, you build a virtual infrastructure (you really just need two softwares, which are FREE), manage the team accordingly and run the business from there.
I’m gonna put together a step-by-step video breakdown this weekend inside the new TRIBE U on the FIVE key things you need to do this for YOURSELF. 💵 💎
From what software to use, how to build a team, how to keep.
In the meantime, drop a comment if you’re ready to build some wealth and any questions if you want more…
Let’s get to work. 🙌
PS: If you can’t be bothered with video and just wanna get to work, we’re hosting a TRIBE U workshopthat will help you get this process started on the spot. It’s $479 $49. 🔥
Warning: count(): Parameter must be an array or an object that implements Countable in /homepages/28/d742565295/htdocs/clickandbuilds/WealthLab/wp-content/themes/zox-news-child/single.php on line 683
You must be logged in to post a comment Login