What is the Difference Between Investing in Commercial Real Estate and REITs?

Should i invest in real estate

If you find yourself with some discretionary income, you might be asking yourself one of two questions: “Should I invest in property?” “Should I invest in Real Estate Interest Funds (REITS)?” These are both worthwhile, but also complicated, questions. Unless you have a background in business or economics, however, it is likely that you will want to seek the advice of a professional.

A Real Estate Investment Trust, is an investment vehicle that owns or finances real estate for the purpose of earning income. Similar to mutual funds, REITs provide all kinds of investors income, as well as diversification and long-term capital appreciation. REITs normally pay out taxable income as dividends to shareholders. Shareholders then pay the income taxes on the earned dividends. REITs are one way for customers to invest in large-scale portfolio properties very similar to investing in other industries.

A less complicated way to invest in property is to purchase commercial real estate. Commercial real estate is property that is only used for business purposes. It usually consists of office space, industrial property, restaurants or retail buildings, and perhaps the most common, multi family residential property. Commercial real estate investment can provide a consistant cash inflow from rent and other residential fees from the property.

In the case of all major investments, it is best to ask an economic or real estate adviser, “Should I invest in property?” Economic advisers and real estate partners can help investors evaluate the risks involved with purchasing and maintaining commercial property. According to IBIS World Research the commercial real estate industry in the U.S. is worth $945 billion and employs an estimated 4,308,177 people. According to the same IBIS research, an estimated 2,344,134 commercial real estate businesses currently operate in America. These companies develop commercial, industrial and multifamily residential property, and, in addition, manage the purchasing or renting of that property.

The most qualified advisers can help you decide, for example, why invest in reits instead of commercial property. When looking for a financial adviser to help you answer the question, “Should i invest in property, and if so, is it better to invest in commercial property or REITs?” consider looking for someone with extensive and long term experience in the real estate business. The adviser you decide to work with should be someone who has at least an undergraduate degree in economics or real estate. Many of the most qualified advisers also have masters degrees as well. The person you select should be able to show you evidence of managing extensive amounts and different types of real estate.

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