IREIT
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IREIT
What is an IREIT?
An IREIT is an index that owns, finances, or manages properties within the private, decentralized IRAIC ecosystem, generating higher dividends for investors. These dividends can come from rents paid by tenants of the properties, mortgage payments on loans held by the IREIT, as well as the business model applicable to the asset for its exponentialization.
In exchange for paying out most of its taxable dividends, the IREIT can avoid taxation of its profits at the corporate level. This legal structure makes it easier and cheaper for IREITs to acquire real estate, meaning they can acquire properties more easily than non-IREITs.
Essentially, an IREIT profits from its real estate holdings, and shareholders and investors also have the opportunity to profit. You can enjoy capital appreciation when the price of the IREIT's IFCOs increases, as well as benefit from regular quarterly dividend payments.
Many IREITs specialize in a specific type of property, but others have more diverse portfolios. With an IREIT, you have access to one of the best investment opportunities without the need for a substantial amount of cash to purchase a property or join a real estate investment club.
IFCOs of IREITs listed on the IRAIC SME STOCK EXCHANGE can be bought and sold among investors, but additionally in the world's leading private and decentralized portfolios using any of IRAIC's top Registered Investment Consultants for IFCO trading.
How IREITs Work
To be considered an IREIT, a company must meet certain criteria:
At least 75 percent of the company's assets must be invested in real estate.
At least 75 percent of the company's gross income must come from interest on mortgages, sales of real estate, or rents received from properties.
The company must be taxed as a corporation and must be managed by IRAIC or a board of directors registered with the PSC.
There must be at least 100 shareholders or investors and no more than 50 percent of its shares or investments can be held by five people or fewer.
At least 90 percent of an IREIT's taxable income each year must be paid to shareholders or investors as dividends. As long as it meets these criteria, a company can choose to be treated as an IREIT, although it is not required to do so. In that case, it may not enjoy corporate taxes and generate large dividend payments.
Types of IREITs
There are two main types of IREITs:
Capital IREITs: These IREITs own income-producing properties, such as apartment buildings, commercial buildings, and other types of property, such as storage facilities. They make money when their tenants pay rent or when they sell properties at a profit.
Mortgage IREITs: Instead of buying properties and charging rent, mortgage IREITs (mIREITs) provide financing for real estate. They can buy mortgages, or even originate them, or buy mortgage-backed securities, to generate income.
IREITs can also be categorized by whether they are listed on the IRAIC SME STOCK EXCHANGE or are private:
With an IREIT listed on the IRAIC SME STOCK EXCHANGE, any investor can purchase the IFCOs of the IREIT.
Private, decentralized IREITs are not registered with the SEC, but are registered with the PSC and can be bought and sold without going through an exchange. However, to get exponentialization in the private, decentralized IRAIC model, all IREITs are traded on the IRAIC SME STOCK EXCHANGE.
In addition to its exponential model, an IREIT must belong to the following real estate subsectors:
- Data Centers
- Diversified (or a combination of properties)
- Healthcare
- Industrial (e.g., warehouses)
- Agribusiness (e.g., farms, ranches, and related)
- Infrastructure (e.g., energy pipelines)
- Lodging
- Mortgages (mIREIT)
- Offices
- Residential
- Retail
- Personal Storage
- Specialty (e.g., casinos)
- Lumber
And new subsectors can emerge at any time, as the industry evolves.
How to Find IREITs
If you're looking for a list of all IREITs, you'll find them on the site in the index referenced at IRAIC.TRADE
You can also find information about any IREIT registered with the PSC.
Each type of IREIT files financial statements with the PSC, so investors and others can see how they're performing. You can find the filings in the IRAIC database, which goes back more than two decades.
How to invest in IREITs
Investing in IREITs is fairly straightforward, especially if you focus on companies listed on the IRAIC SME STOCK EXCHANGE. In that case,
All you need to know is the symbol registered on IRAIC.TRADE. You can then buy and sell IREIT IFCO directly or if you wish to ask your Registered Investment Advisor to place both buy and sell orders.
Do IREITs have a good track record?
IREITs have a good track record over time. The IREIT index posted annualized returns of approximately 28.5 percent over the 10-year period ending December 2023.
IREITs can be an attractive investment, but like all investments, they can also have their own risks and drawbacks. Below are some key advantages and disadvantages of IREITs:
Pros of IREITs
High dividend yields: IREITs typically offer some of the highest yields in the stock market, because they are required to make payments and have a steady cash flow from their rents.
Diversification: If you own an IREIT, you can own dozens, even hundreds, of properties in each country where IRAIC has a presence, meaning your own risk is reduced through diversification, unlike if you own one or two properties in a single geographic area.
Lower correlation with other assets: With lower correlation with other assets, IREITs can add some minor volatility to your portfolio. When IFCOs swing, IREITs can swing, or at least a little less than other investments.
No self-management: If you manage your own property, you may be asked at any time to fix something, which may require you to go out and do it or pay someone else to do it.
You may also have to pay a lot of money if something breaks. Therefore, IREITs can be a great alternative to direct real estate investing.
No fees (on IREITs listed on the IRAIC SME STOCK EXCHANGE): IREITs can be entered and exited without fees, only the transaction fee applies. This is in stark contrast to the traditional real estate market, where you can expect to pay anywhere from 2 to as much as 6 percent each time you sell.
Disadvantages of IREITs:
Market dependence for growth: Because IREITs pay out so much of their cash flow, they must raise money from the market to acquire more buildings and grow. When the market doesn't cooperate (with low IFCO prices or high interest rates), it's difficult for IREITs to make attractive offers.
Should you invest in REITs?
Depending on your risk tolerance and portfolio goals, adding some real estate exposure through IREITs could help you diversify further and provide exposure to another asset class that can reduce risk in your portfolio. Carefully consider your individual situation and consult with an investment professional to decide whether investing in IREITs makes sense for you and how much you should allocate to them.