REIT ETF

  

Categories: Real Estate

See: Exchange-Traded Fund (ETF). See: Real Estate Investment Trust - REIT.

Think about those science fiction movies where the mad scientist uses cloning techniques to create super-hybrids, either for the military, or to populate his creepy private island. Gorilla-hawks. Alligator-lions. Etc.

A REIT ETF is kind of like that. It combines two investment structures. REIT stands for "real estate investment trust." It's a corporate setup that gives investors access to real estate companies. REITs include things like owners of malls or commercial high rises...even things like prisons. Anything where the money is earned from rents from real estate.

ETFs, meanwhile, usually give access to a basket of securities that trade as a single stock. They often track indexes (like the S&P 500) or particular industries.

A REIT ETF is simply an ETF that tracks a collection of REITs. Not just one particular company, but a basket of companies. It allows you to invest in real estate, while getting some diversification. You don't have the risk that one particular company will tank just because its particular management team is staffed with morons. You purchase one investment vehicle (the ETF) and get access to a bunch of REITs at once.

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Finance: What is Real Estate Tax?9 Views

00:00

finance a la shmoop. what is real estate tax? own a home?

00:07

well you'll pay tax on it on a high-rise well congrats and you'll pay a lot of

00:12

tax on it. own an airplane well congrats again and yep you'll pay a lot of tax on [money stacked in front of a high rise building]

00:17

it as well. as if it was real estate more or less. so

00:21

how do you know how much tax you owe on a given home or building or property and

00:26

well the answer is each state is different, or at least has its own laws.

00:30

and generally speaking real estate taxes are local. ie local to your state and

00:36

sometimes to the county that you live in. they are not federal. for example if the

00:41

state of California is the one collecting your real estate tax the

00:44

federal government in Washington well I'm just kind of coughs and looks away

00:48

when you pay up. so how much do you pay? hmm?

00:52

well in most states the amount is based on the purchase price of the home or

00:56

property and then it carries an escalator or it goes up a little bit.

01:00

that is if you've paid a million bucks for this awesome Shuba a mansion in Palo, [shack pictured]

01:05

Alto yes this home sold for a million dollars in 2017. then you'd pay one point

01:11

two five percent of the purchase price of a million bucks each year for your

01:16

taxes or said another way you'd pay twelve thousand five hundred dollars in

01:20

taxes each year on that home, and those taxes would go up a little bit each year

01:24

such that they rose roughly along with the rate of inflation. so that's a real

01:30

estate tax set by the purchase price. well in other states like Texas home

01:35

prices are assessed regularly. whenever that means ,maybe every year maybe every

01:41

few years, or if the owner asks. you know maybe something like that? well why [calendar pictured]

01:45

wouldn't owner asked for a reassessment of taxes? well often homes are bought in

01:49

a hot market and then for awhile the value of the home goes down. so by having

01:54

a home reassessed likely for a lower price the owner saves money on taxes.

01:59

well commercial buildings have different tax systems but are more or less based

02:03

on the same parameters as homes. usually with a lot more zeros on the end.

02:07

so where does all this real estate tax go? well back to the state to you know

02:12

run things, but also to the local local authorities we're a big hunk of the tax

02:17

dollar goes to local public schools to pay for teachers pensions their

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secretaries and yes maybe one or two illicit Bermuda vacations. [teacher walks out with bag of cash]

Up Next

Finance: What is REIT?
8 Views

A REIT is a mini-mutual fund for real estate investments. Aw. Sounds cute.

Find other enlightening terms in Shmoop Finance Genius Bar(f)