Investing In REITs For Dividends (Pros & Cons of Real Estate Investment Trusts)

Are you considering an investment in REITs (or Real Estate Investment Trusts) for dividends and cash flow? I personally own only one REIT in my dividend portfolio and consider my REIT an ancillary (non-core) position. That being said, I am in a unique situation because I work in the real estate industry and own a home (I am already over-weighted, at a high level, in the real estate industry). A subscriber question, today’s video goes into a multitude of pros, cons, and factors to consider about investing in real estate investment trusts for dividend income.

* Do you work in the real estate industry? Do you already own a home? Do you own physical real estate investments? If so, those are all factors worth considering when contemplating REITs for one’s dividend portfolio. When looking at diversification, I don’t only look at my portfolio. I look at all factors in my life. If the real estate industry tanks, I don’t want to get hit on the job front, the home front, and the portfolio front all at once!
* Real estate investment trusts carry important tax considerations. As pass through entities, they avoid double taxation (and are required to distribute most of their earnings). That said, the shareowner has to pay ordinary income on dividends (as compared to long term capital gains on qualified dividends of most corporations). Long story short, the tax rate on dividends from REITs is higher than your typical dividend-paying corporation. Moreover, reporting REIT dividends on one’s tax return can be complicated (the distributions sometimes involve ordinary income and return of capital). Learn why it’s important to weigh tax considerations when investing in real estate investment trusts for dividends and cash flow.
* Since some REITs pay dividends on a monthly basis, they can help you stay in the game. Those monthly dividend checks are great for reinvesting and building one’s portfolio. A subscriber insight, I really love this idea!
* Interest rates are really low right now. As interest rates rise, some REITs may face challenges securing (affordable) capital to do deals. This could affect short-term and future prospects.
* The retail industry is going through a lot of change. When investing in REITs, it’s a wise idea to understand exposure to retail.
* Sometimes, one can experience superior results by investing in real estate directly. It may be more effective to invest in rental properties than going the REIT route. That said, real estate investment trusts are easier since one does not have to actively manage the real estate assets.

Disclaimer: I’m not a licensed investment advisor, and today’s video is just for entertainment and fun. This video is NOT investment advice. Please talk to your licensed investment advisor before making any financial decisions.

All content on my YouTube channel is (c) Copyright IJL Productions LLC.

19 Responses to Investing In REITs For Dividends (Pros & Cons of Real Estate Investment Trusts)

  1. Enfermeiro Investidor

    Hi there! I really loved your video! I started investing in NYSE recently by buying stocks and now I m considering buying REITS. Be sure you now have another follower in your channel! I wanna learn a lot from you. Greetins from Brazil.

  2. MoneyManFernando

    I like real estate but not being a landlord so I started buying REITs about six months ago and unfortunately the prices have been going down. So now what ??

  3. Smartana Jones

    This was better than I thought it would be so good job!

  4. bixby bu

    Thank God I stumbled on your channel, looking forward to see more videos!

  5. Steve Smith

    I'm trying to learn more about REITs. This video has given me a lot more insight on the subject. I appreciate it.

  6. Sonny Torres

    Great video. Taxed as ordinary income? Yikes. Large dividends still come at a cost. Thanks.

  7. kevin heenan

    Put your REITS in a ROTH IRA avoids all taxs

  8. Misael V

    Hi Ian, Can you make video about monthly dividend payers and BDC. THANKS

  9. James McCarl

    I actually chose to start my dividend investment plans with REITs. The high yield and sometimes low cost of shares makes it worth it for me to invest in them, as I’m building very slowly, using Robinhood as my platform for free trading. To me, the monthly dividend coupled with low prices makes it very easy to keep in the game, as well as see that compound effect quicker. This really bolsters my interest and confidence and inspires me to find more ways to add to my portfolio whenever possible.

    That being said, though the intent is to keep interest and see compounding, I intend to Funnel dividends into blue chips as I progress. But to me REITs are a great way to see my money work for me, and really keeps my head in the game.

  10. renloh077

    Didn't even realize that REIT dividends tax are passed on. Thank you. This was very insightful.

  11. zuffykiller

    I learned something new on REIT dividends…keep the videos coming.

  12. avburns

    I do my REIT investing via Vanguard's REIT ETF, VNQ. It has 155 holdings, charges a .12% expense ratio and yields 4.75%. Until recently, you could get this ETF commission-free at TD Ameritrade but now I recommend treating it like another dividend paying stock, doing whatever you do to keep commissions low.

    I think VNQ's massive diversity at a low cost is probably the best way to invest in REIT's (Any REIT of note is probably contained in VNQ). And, like Financial Investor noted, to avoid all the tax implications I use IRA's (regarding ppcian's comment about aiming for early financial freedom, it seems like using a ROTH IRA could be the solution: you can possibly have a tax-free investment that avoids most tax implications that also allows you to take out your contributions [and possibly earnings] pretty much anytime you want).


    Thanks for this great video Ian! My wife and I love that we were able help to give another perspective! Glad you mentioned our comment!

    REITs really helped get our portfolio off the ground and even now give us a nice, monthly, reinvestable dividend. I will say, we've widdled our exposure down with REITS over time, going from 5 to 3. We wanted good diversity and ended up with 3 we consider good companies.

    You made some really great points and did a great job of explaining REITs. This is a video the dividend investing community really needed! I wish it existed when we started our portfolio. Thank you!

  14. Kathy volpe-schaffer

    AGNC pays a monthly 10% dividend too! Can you make up a chart of the different categories of REITS and their corresponding yields?

  15. Kathy volpe-schaffer

    I understand about choosing the right REIT, as retail has challenges; however, I discovered a Healthcare REIT in OHI, and it has an 8% yield!

  16. Patricia Murphy

    Thank you for a complete breakdown on REITs. Have a much better understanding of them now.

  17. Carson Keller

    I only own two O and WRE.

  18. Financial Investor

    If you want to invest in Real Estate (REITs), Use a Self Managed Roth IRA – You report contributions to IRA's, & Report distributions from IRA's, but what goes on inside the IRA itself is not reported on your income tax return. AKA you don't report REIT dividends (WIN WIN WIN)
    Stock Market Videos 124/500 Subscriber Goal

  19. Gateway 17

    Hi Ian, thanks for the video. What is your thoughts on Cryptocurrency? Do you think it is a legitimate investment or just pure speculation.

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