| Real Estate Investment Trusts, although dating | | | | Most of them operate within specific geographic |
| back to the Real Estate Investment Trust Act of | | | | areas, so their managements have extremely |
| 1960, have long been an obscure corner of the | | | | powerful in-depth knowledge and experience in |
| stock market. | | | | their precise specialties. What makes them unique |
| Real estate investors are used to owning | | | | investments, though, is that they operate as a |
| properties directly, not through buying shares of | | | | specific tax structure. They do not have to pay |
| stock. | | | | any federal taxes, so long as they pay at least |
| Stock market investors are not interested in real | | | | 90% of their net operating income out to their |
| estate. | | | | shareholders in the form of dividends. |
| This book has done as much as anyone to bring | | | | This eliminates the traditional double taxation |
| REIT investments into the mainstream of Wall | | | | forced on investors in ordinary C corporations, |
| Street, by pointing out the benefits that adding | | | | and makes these real estate trust companies big |
| them to a portfolio of common stock brings. | | | | friends of people who invest for income. |
| Thanks to their success in the United States, | | | | Because these companies do operate commercial |
| similar laws have been passed in countries from | | | | real estate, there's an important expense called |
| Belgium to Canada to Japan and Singapore, so it's | | | | "depreciation." Block does discuss how recognizing |
| now possible for investors to benefit from real | | | | the expense of depreciation in determining net |
| estate businesses around the world as easily as | | | | income according to Generally Accepted |
| investing in Microsoft, just by contacting their | | | | Accounting Principles (GAAP) somewhat distorts |
| brokers. There are three different kinds: equity, | | | | their true financial status. (Though there's no real |
| mortgage and hybrid (a combination of the first | | | | solution to this problem, since cost accountants |
| two). | | | | can't foretell the future.) |
| Equity ones directly develop, acquire, own, | | | | However, he doesn't thoroughly explain the |
| manage, lease, renovate, tear down, rebuild and | | | | implications of this in a detailed way. In several |
| sell commercial properties. Mortgage ones provide | | | | places, I understood what he was saying, but only |
| the financing for the above activities. | | | | because I took Accounting courses in college. |
| There're about 6 times as many equities as | | | | And in the first chapter he outlines the |
| mortgages, and that's where the most advantage | | | | advantages owning these companies bring to |
| lies for ordinary investors, so that's what this | | | | investors. He mentions their high dividend yield, but |
| book concentrates on. | | | | doesn't explain that from 25-30% (historical |
| The business profits of mortgage ones is closely | | | | average) of these high yields come from lowering |
| tied to the interest rates prevailing in the | | | | net income by a depreciation expense. This |
| economy as a whole, and so their returns closely | | | | means that the IRS treats this as "return of |
| imitate bonds. | | | | principle," and it's therefore not taxable to |
| This is a comprehensive look at all aspects of | | | | shareholders until (and unless) they sell their |
| these little-known investments: their business, | | | | shares of stock. |
| stock market and legislative history, how they | | | | This ability to indefinitely defer paying taxes on a |
| work, the various types, how to analyze their | | | | substantial part of your dividend check makes |
| financial statements, how to pick out blue-chip | | | | these investments even more beneficial to |
| companies, myths about them (and the truth), | | | | investors than Block describes. |
| how to build a portfolio of them, and speculations | | | | Maybe he didn't want to hit readers over the |
| about their future. | | | | head with this complex benefit right away, but |
| Basically, they operate specific types of | | | | why save it until the Appendix labeled "Death and |
| commercial real estate businesses (office buildings, | | | | Taxes" -- which many readers will probably skip? |
| neighborhood shopping strip centers, malls, golf | | | | This is my only major beef with this book -- it |
| courses, self-storage facilities, industrial parks, | | | | could have made an even stronger case for |
| hospitals and other health care institutions, and so | | | | investing in REITs than it already does. |
| on). | | | | Highly recommended. |