The basic concept of REITs is essentially the same regardless of the type. A REIT draws down relatively cheap fixed- and/or floating-rate debt, build or buys real estate and/or buildings, and gets cash flows from that property by leasing it out in some form. It could be to a business tenant, or to nightly tenants if it’s a hotel. The debt is serviced with the cash flow, and debt may get paid down, as well. After expenses are deducted, including taxes, 90% of the remaining earnings are distributed to shareholders. The more efficient the company cash flows, the higher the yield. Here are three REITs that yield more than 7%...
Independence Realty Trust Inc (NYSEMKT:IRT) has jumped on the trend of apartment rental properties. The business is booming because of a shortage of housing in many cities. IRT will lend money against these properties, but will also own and operate them. City Office REIT Inc (NYSE:CIO) is a much smaller star in the REITs universe, but I also like to have a mix of smaller plays because they have more potential to grow, and therefore generate capital gains as well as dividends. Starwood Property Trust, Inc. (NASDAQ:STWD) is a REIT that I used to avoid like the plague, thanks to ongoing irrational fears after the mortgage crisis. I just did not like commercial mortgage REITs. But I got over that fear, thanks to this REIT that has a dividend yield of 8.5%.
Source: InvestorPlace
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