A real estate investment trust, or REIT, is a company that owns income-producing properties and distributes the free cash flow to investors in the form of dividends. Yet unlike most companies, REITs are not taxed at the corporate level, which enables them to avoid the dreaded “double-taxation” of corporate tax AND personal income tax. And thanks to the 2017 tax bill, REITs qualify for the new 20% deduction on pass-through income.
There are generally two types of REITs: traded REITs and non-traded REITs. Traded REITs are bought and sold on a major stock exchange (like the NYSE), making them subject to pricing volatility and a “liquidity premium” associated with being freely tradable. Thus, traded REITs typically offer a LOWER dividend. In contrast, non-traded REITs such as stREITwise are not subject to the same liquidity premium, and as a result aim to offer higher dividends.
Find out more about REITs.