With REITs, You'll Fit Right In

With the economy gaining strength, this might be a good time to consider investing in commercial real estate. You can do that via real estate investment trusts [REITs]. REITs trade like regular stocks, but they don't pay U.S. federal income taxes as long as they pay out at least 90 percent of their taxable income to shareholders. On the downside, REIT dividends are mostly taxed as regular income instead of the lower 15 percent capital gains rate. So it's best to keep REITs in tax-sheltered accounts.

Dividend yields are analogous to the interest rate on a savings account. For a stock, your yield is the dividends you receive over a year divided by the price that you paid for the stock. So your yield would be 10 percent if you received $1 per share of dividends from a stock that cost you $10 per share. Currently, most property REITs are paying dividends equating to three percent to seven percent yields.

Source: Santa Cruz Sentinel

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