Adding real estate assets to a retirement portfolio

Illinois residents who are looking for ways to add value to their retirement portfolio may want to consider investing in the real estate market. While stock market returns are stalling, bond funds are only earning around 3 percent annually and hedge funds are not doing very well, real estate is looking like a safer investment for people who want to earn a 5 to 8 percent annual return.

Investing in real estate used to require a huge time commitment. People who wanted to earn income from residential or commercial rentals would have to purchase properties, renovate them and then take on all of the responsibilities of a landlord. Now, an investor can simply buy shares in a real estate investment trust and wait to receive annual dividends.

A real estate investment trust is a company that purchases real estate assets and holds them for profit. A REIT might earn profit from sales of its properties or through rental income. There are different types of REITs that specialize in different real estate sectors and are structured in various ways. The performance of REITs is different than the performance of stocks and bonds, and some investment advisers recommend keeping only 15 percent of an investment portfolio in REIT shares.

While REIT's may be attractive to passive investors, there are other people who prefer to take a more proactive approach to commercial real estate ownership through the development of a project. This is a complex area with many potential pitfalls, ranging from zoning to financing to lease agreements, however, making the assistance of experienced legal counsel advisable.

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