REIT Calculator
Analyze real estate investment trust returns and distributions. Calculate your potential income and growth from REIT investments with various scenarios.
REITs offer a way to invest in real estate without direct property ownership. They typically provide higher yields than traditional stocks and can be an excellent source of passive income. Use this calculator to model your REIT investment strategy and see how dividends and capital appreciation can build wealth over time.
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Check this to automatically reinvest all dividend payments
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Understanding REITs
What are REITs?
Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-producing real estate. They're required to distribute at least 90% of their taxable income to shareholders as dividends.
REITs provide exposure to real estate markets without the complexity of direct property ownership, offering liquidity and professional management.
REIT Investment Tips
- • Diversify across REIT sectors (residential, commercial, industrial)
- • Consider both equity REITs and mortgage REITs
- • Monitor interest rate sensitivity
- • Look for REITs with strong fundamentals and growing FFO
- • Consider REIT ETFs for instant diversification
Frequently Asked Questions
What are REITs and how do they work?
REITs (Real Estate Investment Trusts) are companies that own and operate income-producing real estate. They allow investors to buy shares in commercial real estate portfolios, receiving dividends from rental income.
What's the difference between equity REITs and mortgage REITs?
Equity REITs own and operate real estate properties, earning income from rent. Mortgage REITs (mREITs) invest in real estate mortgages and mortgage-backed securities, earning from interest rate spreads.
What are typical REIT dividend yields?
REIT dividend yields typically range from 3-8%, often higher than traditional stocks. REITs are required to distribute at least 90% of their taxable income to shareholders as dividends.
How do interest rates affect REITs?
Rising interest rates can negatively impact REITs by increasing borrowing costs and making bonds more attractive. However, REITs may benefit from higher rents and property values in inflationary environments.
Should I invest in individual REITs or REIT ETFs?
REIT ETFs provide instant diversification across multiple properties and sectors with lower risk. Individual REITs allow targeted exposure but require more research and carry higher concentration risk.
How are REIT dividends taxed?
Most REIT dividends are taxed as ordinary income, not at the lower qualified dividend rates. However, you may be eligible for a 20% deduction on REIT dividends under Section 199A.
What should I look for when evaluating REITs?
Focus on Funds From Operations (FFO), debt-to-equity ratios, occupancy rates, geographic diversification, and management quality. Also consider the specific real estate sectors and their growth prospects.
What percentage of my portfolio should be in REITs?
Many experts suggest 5-15% of a portfolio in REITs for diversification. REITs can provide inflation protection and income, but shouldn't dominate your portfolio due to their interest rate sensitivity.