The biggest pitfall with REITs is they don't offer much capital appreciation. That's because REITs must pay 90% of their taxable income back to investors which significantly reduces their ability to invest back into properties to raise their value or to purchase new holdings.
What is the downside of REITs?
REITs tend to have above-average dividends and aren't taxed at the corporate level. The downside is that REIT dividends generally don't meet the IRS definition of "qualified dividends," which are taxed at lower rates than ordinary income. ... Even so, REIT dividends are typically taxed higher than qualified dividends.10 ago 2021
Is it worth investing in a REIT?
REITs are total return investments. They typically provide high dividends plus the potential for moderate, long-term capital appreciation. ... The relatively low correlation of listed REIT stock returns with the returns of other equities and fixed-income investments also makes REITs a good portfolio diversifier.