Real Estate Investment Trusts (“REITs”)

By Paul Ohanian

I have been designing financial portfolios for a wide range of clients for 25 years and come across many types of investment strategies. I often look to real estate investments to provide asset diversification, lessen general stock market exposure and, where appropriate, generate income. While my clients, and truly Arizonians at large, are no strangers to the financial benefits of holding real property, in recent years with the downturn of the real estate market, I have come to favor Real Estate Investment Trusts (“REITs”) as an alternative. A REIT provides liquidity and flexibility that owning real property may not.

Many people have heard the term REIT, but are not familiar with its functionality and benefits. A REIT is a professionally managed pool of real estate investments in which investors purchase an undivided interest in the pool. Usually the pool is in the form of shares that receive dividends or capital gains distributions, trading publicly or privately. Public REITs trade on exchanges and OTC markets, where private REITs are less liquid than their public counterparts, but offer interesting buying opportunities on the secondary market where they can be traded at a discount, below book value.

REITs allow investors to invest in a variety of properties that they may not be exposed to otherwise, including office buildings, apartments, hotels, retail space, and medical facilities – these properties can be a part of the investment pool. Currently, REITs focused on our local Arizona markets do exist; however, investment in much broader real estate markets can provide additional, and often much needed, diversification to a portfolio that results in better financial outcomes. Owners of a REIT can invest in properties nationwide or in international and emerging markets through foreign REITs, taking advantage of real estate markets and opportunities beyond our borders.

If you are interested in being invested in real estate while waiting for the market to turn around and need liquidity, I consider several strategies. I will provide further information in the November issue of the Arizona Journal of Real Estate & Business.

Paul Ohanian is founder and CEO of Scottsdale Wealth Planning, an Old Town-based registered investment advisor, and Certified Financial Planner® with more than 25 years of experience providing financial services to the Valley. Paul can be reached at (480)550-8555 or visit him at www.scottsdalewealthplanning.com.

Information contained in this article is for informational purposes only and should not be considered investment advice. Advice may only be provided after entering into an advisory agreement with Scottsdale Wealth Planning. Information is at a period in time and subject to change. Scottsdale Wealth Planning’s current Disclosure Brochure is set forth on Form ADV Part 2 and is available for your review upon request.