In this post, we discuss how REITs have become more desirable than direct real estate investments because of changes in federal tax rules.
Real estate investment trusts or REITs have long had investment advantages over directly owning properties.
Recent changes in federal tax rules have only increased their desirability by offering improved net returns from REIT investment as opposed to direct real estate investments.
New Federal Tax Rules Create Advantage for Real Estate Investment Trusts
As Generation X and millennials inherit their baby boomer parents’ assets amid the so-called Great Wealth Transfer, some will look to invest it in rental property to generate income.
This property might be a duplex, an apartment building or, depending on the location, a single-family house that could eventually become a retirement home.
Yet many aren’t aware that because of the various costs and risks involved, becoming a landlord — a role fraught with headaches — may not turn out to be profitable.
An alternative to direct investment
A hands-off alternative to direct real estate investment is a real estate investment trust. These firms sell shares to investors, use the cash to buy residential, commercial and industrial property to lease out, and pay dividends to shareholders.
As an investment, REITs have long had advantages over owning property directly. This advantage gap is widened by new federal tax rules.
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The Law Offices of Lora Fausett P.C. provides real estate law services including loan modifications, buying and selling legal assistance, short sales and deeds in lieu, mortgage foreclosure defense, and more.