How to Invest in Real Estate Stocks
The stocks of companies that own and manage real estate are called real estate investment trusts, or REITs, which operate under a special tax provision in which they pay taxes now if most of the income is paid to investors as dividends. Investing in REITs through dividend reinvestment programs, or DRIPs, is low cost and allows for compounding of the dividends earned.
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Instructions
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Review the list of REIT stocks that have dividend reinvestment programs at the Invest in REITS website included in the Resources below. You will see these stocks invest in many different forms of real estate. Write down the names of all that interest you.
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Go to the website of each REIT on your list. Find the link for "investors" or "investor relations" and select that webpage. On that page will be a link for "dividend reinvestment plan" or something similar. Look for the prospectus and enrollment form that you can download to your hard drive.
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Read each prospectus and take special note of the minimum required to invest and the fees to purchase and sell shares. The best DRIP programs will have no fees for purchases and very low or no fees to sell shares.
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Compare the REITs in your notes. Determine which have the best fee structure. Review the types of real estate the companies own and their historical return to investors. Select those REITs that are most attractive to you.
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Print out the enrollment form for the REIT in which you want to invest. Complete the form and mail it as directed with a check for at least the minimum initial investment. You may start with a single company or invest in several.
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Dividend reinvestment plans allow you to add to your holdings with additional shares purchased monthly. You can send in a check to buy more shares or set up an automatic investment plan. If you want to invest automatically, download and print the automatic investment authorization form, fill it out and mail it to the plan administrator.
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Tips & Warnings
DRIP plans are best for investors who want to accumulate shares over time. An investment in a diversified pool of REITs can be accomplished by investing in a mutual fund holding only real estate securities. The process is similar.
Investing in any stock involves the risk of market fluctuation, including complete loss of your investment.
