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Some investors like the diversification and potential of these investment trusts.

Presented by MidAmerica Financial Resources

What are REITs? A Real Estate Investment Trust (REIT) allows investors to purchase shares of a real estate portfolio, helping them gain exposure to the real estate market. REITs make money through rents and capital gains. A REIT has to pay out 90% of its operating profits as distributions – a condition it accepts to avoid paying corporate income tax.1 The typical equity REIT invests in a commercial property niche – malls, office buildings, resorts and so forth.

Sometimes you can gain exposure to these investments through a REIT mutual fund or a REIT ETF.1,2 Investors should keep in mind that investments in mutual funds or ETFs will fluctuate with market changes, and shares may be worth more or less than their original cost upon redemption.

What are the risks of REITs? They have limited liquidity and are not for everyone. The value of your investment depends on the underlying portfolio of real estate and can change based on economic, regulatory and environmental factors. Distributions can be impacted by fees and charges, are subject to change, and may be paid from sources other than operational cash flow (including debt financing or offering proceeds). There’s no guarantee any stated objectives will be met. Upon redemption, the value of your investment may be more or less than the original price paid.

Non-public REITs are not publicly traded, so they also involve the risks of limited liquidity and transferability. The offering may not qualify or continue to qualify as a REIT, which would subject your investment to taxation at the federal level (potentially at state and local levels too). The investment offering may use leverage (debt), which can place the REIT at greater risk of default and devaluation. This may result in investment losses and/or a reduction in, or suspension of, distributions.

What is a medical REIT? Through a medical REIT, you can invest in medical centers, medical office buildings or retirement and nursing homes. Commonly, these REITs buy a property and lease it back to the healthcare provider through a net lease with the REIT taking care of property management.

Why consider medical REITs? Demand is increasing for healthcare and long term care facilities. The population of Americans age 65 and older is projected to grow 36% in this decade. This is why many advisors feel medical REITs are worth a look. Additionally, hospitals and healthcare providers constantly need capital. By selling a facility to a REIT, they get it. They can also get more debt off their balance sheets, which may help their ratings improve. Most medical REITs involve publicly traded companies. Other medical REITs are non-public REITs – start-ups that might go public in the future. As medical REITs are not directly correlated to stocks, they attract investors who want diversification against stock market volatility.

Are these REITs for you? While they are less diversified and therefore subject to additional risk, medical REITs are attracting some sophisticated investors. You can explore investing in medical REITs with the help of a financial professional who understands their subtleties; he or she can determine if investing in a medical REIT is right for you.

                          MidAmerica Financial Resources may be reached at (618)548-4777 or douglas.malan@natplan.com


This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. Diversification cannot ensure a profit or protect against loss. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.


1 – www.sec.gov/answers/reits.htm [1/17/12]

2 - www.investopedia.com/university/20_investments/17.asp#axzz28plfV7Ue [10/9/12]

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