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No. of Recommendations: 2
I think the answer to this depends on how much faith you have in the managers of the REOC, as these RE companies have the choice of retaining their after-tax earnings or distributing some or all of it to shareholders. There are some distinct advantages to this, as they can retain earnings to use to add to their propery holdings without having to go to the markets for much of their capital.

OTOH, holding cash is awlays tempting to use to pad salaries and other benefits.

REITs must distribute most (at least 90%) of their taxable income, and so must use the capital markets/private capital to fund growth. But the good part here is that you, the investor, get your cut early, the REIT does not pay (or pays very little) tax on net earnings and these REITs are much easier to track and monitor than RE operating companies.

And REITs generally make better sources of income than corporations, due to the minimum distribution rules.

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