Reclassification means changes in real estate market

Illinois residents who are interested in investing in real estate might be interested to learn that the market is poised for a change. Starting on Sept. 1, real estate has been moved into its own category separate from financials by two leading indices. Real estate has consistently done better than than the S&P 500. Mortgage real estate investment trusts will not be included in the new category, but all other REITs will be.

The financials sector may suffer with its strong-performing REITs gone while it is not yet clear what will happen in real estate. This uncertainty might create some anxiety among investors. The new classification means that the strong performance of REITs will be highlighted for investors who may not have been aware of its strength, and this may attract both active and passive investors. However, some investors might still view real estate as a risk due to the 2008 crash.

However, commercial real estate has surged to a strong recovery post-recession. REITs pay higher dividends than some other types of investments. They must pay a minimum of 90 percent taxable income in dividends.

Investors who are hoping to take advantage of the real estate boom might want to work with an attorney during both purchase and ownership. Buying and owning real estate might include a number of legal complexities ranging from dealing with contract negotiations and liens to zoning laws, liens, easements and other issues. If an investor is interested in development, this might introduce additional complexities. However, neither this nor the uncertainty introduced by the reclassification should necessarily discourage new investors. An attorney might be able to explain some of the likely complications that may arise and assist in dealing with them.

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