Real estate investing doesn’t always mean buying property. For high-net-worth individuals, family offices, and private enterprises, investing in a Real Estate Investment Trust (REIT) can offer an efficient, diversified, and income-generating way to access real estate markets, without the complexity of direct ownership. But how do you invest in a REIT the right way? And how do you ensure it fits within a larger tax and wealth strategy?
At Prosperity Partners, we work closely with clients to build tailored REIT strategies that support long-term financial goals. Contact us to explore how we can help you invest with confidence and clarity.
What Is a REIT?
A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate. By law, REITs must distribute at least 90% of taxable income to shareholders. In exchange, they avoid corporate income tax, making them a popular vehicle for generating consistent dividends.
Why Invest in a REIT?
REITs offer investors:
- Passive income through regular dividend payouts
- Portfolio diversification through real estate exposure
- Liquidity (especially for publicly traded REITs)
- Access to commercial-grade assets like office buildings, industrial parks, retail centers, healthcare facilities, and multifamily housing
Types of REITs You Can Invest In
Not all REITs are created equal. Choosing the right type depends on your goals, risk tolerance, and tax strategy:
1. Publicly Traded REITs
These are listed on stock exchanges and can be bought and sold like any other stock. They’re highly liquid and easy to access via brokerage accounts.
2. Public Non-Traded REITs
Registered with the SEC but not traded on public exchanges. They offer lower liquidity but often promise steady income and less volatility.
3. Private REITs
Not registered with the SEC and only available to accredited investors. These require more due diligence and strategic planning but may offer unique tax and yield advantages.
How to Invest in a REIT: Step-by-Step
Step 1: Determine Your Investment Objectives
Are you seeking income, diversification, tax sheltering, or estate planning advantages? Defining your goals upfront shapes the right REIT strategy.
Step 2: Choose the Right Type of REIT
Working with an advisor can help you weigh the pros and cons of public vs. private REITs and how each fits into your broader portfolio. To learn more, explore our guide on what are the best REITs to invest in or contact us for more!
Step 3: Conduct Due Diligence
Analyze REIT structure, underlying assets, historical performance, fees, and governance. If you’re investing in a private REIT or forming one yourself, deeper tax and legal analysis is required.
Step 4: Plan for Tax Treatment
REIT dividends are generally taxed as ordinary income but may include capital gains and return of capital. A strategic tax plan can reduce your effective tax rate. Explore our REIT and UPREIT tax structuring services for more insight into optimizing tax outcomes.
Step 5: Monitor and Rebalance
Just like any investment, REITs should be reviewed regularly in light of market changes, interest rates, and evolving estate or succession goals.
Strategic Tax Structuring for REIT Investments
If you’re investing significant capital or representing a family office or private enterprise, your REIT investment strategy should be integrated with your entity structures, estate planning, and overall financial framework.
At Prosperity Partners, we help clients:
- Structure tax-efficient REIT and UPREIT vehicles
- Optimize QBI deductions on REIT dividends
- Navigate REIT qualification rules and prohibited transaction risks
- Coordinate REITs with estate, trust, and partnership strategies
Considering a Rollup or UPREIT Strategy?
REITs and UPREITs aren’t just investment vehicles, they’re powerful planning tools. A Rollup or UPREIT strategy can help consolidate ownership, defer capital gains taxes, and unlock access to public capital markets. These structures are especially effective for owners of appreciated real estate or private equity-backed platforms looking to scale efficiently.
Forming a REIT or UPREIT
For institutional investors, developers, or property owners, forming your own REIT or UPREIT can offer control, liquidity options, and tax efficiency. Prosperity Partners were instrumental in creating the first UPREIT structure in the early 1990s and continues to advise public and private REITs on formation, compliance, and ongoing tax management. Visit our page on REIT and UPREIT structuring to learn more.
Ready to Invest in REITs Strategically?
Whether you’re buying shares of a public REIT or considering launching your own structure, we help you invest with clarity, confidence, and compliance. Contact our team to explore how we can align your REIT strategy with long-term tax, estate, and business goals.
Frequently Asked Questions
Is it a good time to invest in REITs?
REIT performance is influenced by interest rates and market cycles. They remain a strong long-term option for income and diversification. Timing should be based on your individual financial strategy, not market headlines.
Can I invest in REITs through my retirement account?
Yes. REITs can be held in IRAs and 401(k)s, offering tax-deferred or tax-free income depending on the account type.
What’s the minimum investment for a REIT?
Public REITs can be bought for as little as the share price (often under $100). Private REITs may have higher minimums, typically $25,000 or more.
Are REIT dividends taxed differently?
Yes. Most REIT dividends are taxed as ordinary income, but some may qualify for capital gains or return of capital treatment. Strategic tax planning can help minimize your liability. Contact our team for more!
Can Prosperity Partners help me invest in REITs?
Yes. We provide tax, entity structuring, and compliance support for individuals, family offices, and enterprises investing in or forming REITs and UPREITs.