Can I Buy REITs Through A Brokerage Account? • 1031 Exchange Place (2024)
Yes, you can buy REITs (Real Estate Investment Trusts) through a brokerage account. REITs are traded on major stock exchanges just like other stocks and exchange-traded funds (ETFs), so you can purchase them through a brokerage account that allows you to trade in the stock market.
To buy REITs, you’ll need to open a brokerage account with a brokerage firm or an online broker. Once you have an account, you can search for the REITs you want to invest in, and place an order to buy shares just as you would for any other stock.
It’s important to do your research and understand the risks involved before investing in REITs, as with any investment. You should also consider your investment objectives, risk tolerance, and other factors to ensure that REITs are a suitable investment for you.
An investor is not able to do a direct 1031 exchange into a REIT since REIT shares are not considered “like kind” property by the IRS for the purposes of a 1031 exchange.
A lawful 1031 exchange per the Internal Revenue Code (IRC) Section 1031 permits investors to exchange their investment property for a like-kind asset to defer capital gains taxes. Investors cannot complete a 1031 exchange into a REIT since they are not technically like-kind assets.
Publicly traded REITs can be purchased through a broker. Generally, you can purchase the common stock, preferred stock, or debt security of a publicly traded REIT. Brokerage fees will apply.
As mentioned, a 1031 exchange is reserved for property held for productive use in a trade or business or for investment. This means that any real property held for investment purposes can qualify for 1031 treatment, such as an apartment building, a vacant lot, a commercial building, or even a single-family residence.
Is a Roth or traditional IRA the best choice? To be clear, retirement accounts are ideal places to hold REIT investments, as the benefits of tax-deferred investing can magnify the already tax-advantaged nature of these companies.
If the REIT held the property for more than one year, long-term capital gains rates apply; investors in the 10% or 15% tax brackets pay no long-term capital gains taxes, while those in all but the highest income bracket will pay 15%.
The property must be a business or investment property, which means that it can't be personal property. Your home won't qualify for a 1031 exchange. However, a single-family rental property that you own could be exchanged for commercial rental property.
Under the Tax Cuts and Jobs Act of 2017 signed by President Donald Trump, stocks and bonds are not included in a 1031 exchange because they are not real property.
Many REITs are registered with the SEC and are publicly traded on a stock exchange. These are known as publicly traded REITs. Others may be registered with the SEC but are not publicly traded.
The exchange funds can be used only to buy Replacement Property, pay closing costs or pay off a mortgage or deed of trust covering the Relinquished Property.
REITs, or real estate investment trusts, own or finance income-producing real estate across property sectors, such as healthcare facilities or warehouses. These companies must meet several requirements to qualify as REITs. Most REITs trade on major stock exchanges.
Introduction: My name is Trent Wehner, I am a talented, brainy, zealous, light, funny, gleaming, attractive person who loves writing and wants to share my knowledge and understanding with you.
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