How do I Choose the Best Mortgage REIT?

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  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 03 February 2020
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Investors who are looking at choosing the best mortgage REIT options often make their selections based on certain criteria including yield, expenses, tax burden, access and volatility, as well as attention to the actual underlying securities and assets that make up these sometimes complicated financial products. A mortgage REIT is a Real Estate Investment Trust that invests in mortgages or mortgage-backed securities, or deals in loan transactions involving gain based on interest rates. There are many different kinds of mortgage REIT options to look at, and investors will be well served by applying a lot of comparison to all of the different REITs that they find available to them.

Initially, lots of investors look at potential gain balanced against expenses for a mortgage REIT. These products often include commission costs or other fees that investors have to be aware of. Different funds also have different yields or projections of future gains based on their leadership strategy and financial positioning.

Beyond yield and expense, investors look at the makeup of a mortgage REIT. Some of these funds choose to purchase mortgages. Others make deals on fixed rate or floating rate loans. Some mortgage REIT funds focus on mortgage or debt related to commercial real estate, and others take on residential real estate transactions, such as loans involved in federal residential real estate companies Fannie Mae and Freddie Mac.


Investors may also look at how they can trade a mortgage REIT. Some of these funds are available as day traded products in the form of exchange traded funds or ETFs. That may make them more desirable to an investor who wants to be able to “get in and out” of these funds quickly. Some will generate more commissions for such activity than others.

One of the things that investors often look at in a mortgage type REIT fund underscores the traditional relationship between the single investor or REIT shareholder, and the financial leadership that actively manages these funds. The investors want to see, through a prospectus and other details, information about the overall strategy of REIT managers. They want to see how acquisitions are pursued, what kinds of business the management prefers to get involved in, and how much risk the REIT handlers are willing to take. All of this also makes a big difference in whether an investor will be drawn to a particular mortgage REIT product. Funds such as real estate investment trusts offer investors the ability to really fine tune how they put their money into real estate.



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