I gotta thank you guys. My trip into the general investing world started with crypto. My balls got heavy, I started thinking of the future more broadly and now I think a nice little foray into related topics would be really cool.
Why? Because it gives me more content by which I can have an asshole opinion. That and traditional investing isn’t really all that sexy. Crypto is sexy. Sweet, hot internet money from the minds of anonymous people. Who doesn’t like to roll in the hay with a few unprotected, complete strangers?
ANYWAY, What I’m getting at is that there’s other cool investment stuff I feel like I could tackle in addition to my crypto adventures. I’m no expert, of course, and whatever the hell I say shouldn’t be considered financial advice. Seriously, would you take financial advice from some jackass on the internet? I wouldn’t. Unless it was Matt Damon. Then I totally would. I would take all of his advice.
So, today we are gonna talk about Real Estate Investment Trusts, and what the hell that is.
WHAT THE HELL IS THAT?
So, pretend for a moment that you REALLY wanted to invest in real estate. The only problem is that you’re broke as hell and you have absolutely no patience for meth heads who stiff you on the rent. On top of that, landlords have received a bad rap for hell, I don’t know, SINCE THEY BEGAN TO EXIST. Lots of money to be had in real estate, but at what cost? Maybe 20k to 100k USD upfront. Ain’t nobody got time for that unless you’re already ballin’ or you have saved up money from your job at McDonalds for 35 years.
Fortunately, there is a way where you can get some exposure to the real estate markets without having to evict people and sponge up cat piss to make the house re-livable. All you gotta do is buy a couple shares of a REIT. REITs are basically special companies that typically own an ASSLOAD of real property (You can buy REITS in many different real estate sectors such as residential, medical or hell, even industrial!) and pay out a portion of their profits to their stockholders. These are the dividends that the REIT pays out to people.
In fact, REITs are legally obligated to dole out 90 percent of their profits to their share holders. As a result, the yield percentage of REITs is very often higher than ordinary company stocks, and that’s fantastic. For example, one REIT called Realty Income (Ticker ‘O’) currently pays out 4.18% to their shareholders. What does that mean? Every year, you get a total of 4.18% of the share price for each share you own. For example, Realty Income is currently priced at 67.78 USD at the time of this writing, which means for every share of O you own, you will receive 2.83 USD. Got a hundred shares? You just made 283.00 USD in dividend income. That’s pretty tits, if you ask me.
Here’s the kicker: In the case of Realty Income, they pay out monthly. So taking that 100 share number again, you would be paid 23.50 USD per month.
Okay, so in the grand scheme of things, that does sound a bit paltry. Look at it this way: The more you invest, the more dividends you receive. Dividend investors enjoy REITs for this very purpose. They pay out at higher rates. BUT, there are risks involved, as with all investments.
THE RISKS OF BUYING INTO REITS
Okay, so some of you might remember that in 2008 there was this really bad thing called the Great Recession. It took the economy, beat it to a pulp and shoved it up Uncle Sam’s ass so far that it was hitting the back of his teeth. In essence, this was a boom- and subsequent bust of the US housing market, and fun investments like Mortgage backed securities and such lost a SHITLOAD of value.
What does that mean? Basically, house market go boom-boom. Lots of money was lost in the markets. This was caused for a number of reasons, but the idea is that real estate can and almost certainly always will experience great booms and busts over time. Real Estate is very much a cyclical market, and if you’re not in it for the long haul, you might lose your ass.
If you’re not afraid to lose your ass and you’ve done your research on the history of the REIT (and how it performed during 2008, for example) then investing in them just might be for you.
But BEWARE OF THE SPOOPY INTERNAL REVENUE SERVICE. The real IRS. Not the one that calls from India. Big difference.
TAX CONSEQUENCES OF REITS
Okay, so you have two different types of dividends in the market: qualified and unqualified dividends.
Qualified dividends are those disbursed from a US company (or qualified foreign company) that have been held for a particular holding period. What’s the holding period? Between 60 days before what’s called the ex-dividend date (the “cutoff” time where shareholders can be credited for dividends receivable) and 60 days after, you must have held the stock for.. well, 60 days for common stocks. Preferred stocks have a different rule, but that’s out of the ballpark for now. Qualified dividends are taxed at a lower capital gains rate which goes from 0% (no, really) to 20%. That’s pretty awesome.
Unqualified dividends are a little trickier. On top of common stock dividends that haven’t met the qualified requirements, other investments such as REITs are taxed as regular income. So, instead of getting a piece of that sweet ass reduced tax rate, you get report your REIT dividends as ordinary income tax rates.
It’s just the name of the game, and some might consider the higher yields of REITS not worth the tax burden. BUT if you wanna be sure about the tax consequences, go see a certified tax professional to give you the latest and greatest on the current tax rules. Is it worth it? YOU DECIDE.
THE FINAL WORD
If you’re looking for a way to pad out your portfolio with some higher yields and don’t mind crossing the tax minefield, then you might wanna check out REITS. Income investors enjoy having them as part of their portfolio, and they can assist in making a return that seasoned investors can live on.
THANK YOU so much for reading today. If you’re interested in getting started, I recommend Webull to start the journey. I use them myself of course, and I think they make the stock market as easy as it can be made.
CLICK HERE, open an account and get started with two free stocks!
Yeah. That's a ref link. Keep your eye on the markets, folks. And don't let your one-eyed monster get chafed in the Crypto Orgy.