As many of my followers know, I like to invest in real estate as part of my overall investment strategy. Unlike others, I’m just not into buying specific properties and replacing toilets. Instead I invest in REIT’s, Real Estate Investment Trusts, they buy and manage the properties and i just collect the dividends and watch my investments grow in value. My REIT’s are part of my “Cash Machine” portfolio.
REIT’s are considered “pass through” businesses, they don’t pay Federal income tax themselves, they pass that tax on to us investors (similar to you owning rental property). This is not very complicated at all, prior to the new 2017 Trump Tax Law if you held REIT’s in a taxable account, you paid tax on all dividends as “ordinary income”.
HOWEVER – REIT investors will pay less tax on their dividends under new tax law. It allows investors to deduct 20% of the dividend income, with the remainder of the income taxed at the tax payers ordinary income rate. It is available even if the taxpayer doesn’t itemize deductions.
Of course if you hold your REIT’s in a tax advantaged account like an IRA or a ROTH IRA you don’t pay taxes on the dividends, until you take money out.
I own the following REIT’s:
American Capital (AGNC) 11.32% yield – Residential Mortgage’s
ARBOR Rlty (ABR) 9.12% yield – Commercial
Annaly (NLY) 11.45% yield – Residential Mortgage’s
Blackstone Mortgage (BXMT) 7.60% yield – Senior Loans Commercial Mortgages
Iron Mountain (IRM) 6.40% yield – Data storage (not really a REIT?, but it is)
Ladder Capital (LADR) 8.09% – Fixed & Floating Rate Commercial Mortgages
Realty Income Corp (O) 4.74% yield – Over 5,000 Net Leases, 575 straight monthly dividends paid
Stag Industrial (STAG) 5.14% yield – Industrial Buildings
REIT’s can be a valuable component to your investments, and now you may get a tax savings too!