REIT- taking dividends in cash?

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nick evets
Posts: 248
Joined: Wed Mar 01, 2017 5:40 pm

REIT- taking dividends in cash?

Post by nick evets » Sat Feb 23, 2019 12:03 pm

Years ago, we were sold 3 non-traded REIT's by our advisor. We've liquidated two (essentially breaking even), and retained the third because we hadn't held it long enough to avoid a redemption penalty. *If* I can believe the NAV it's grown impressively and generates $1k of dividends quarterly, which are reinvested (into more REIT shares). It's in her tax-advantaged IRA.

Since my wife is now 59, and we could use a bit of extra cash, is there any downside to asking the account holder to cancel the DRIP, and instead simply dump the cash into the account, and we'd start pulling it in 6 months? From what I understand, the new tax law would reduce the tax on the dividends from our regular income rates to about 19%.

The alternatives:
1) do nothing and sell something else in her IRA, but pay a higher tax rate.
2) sell X number of shares back to the REIT, under their redemption program, but they only pay 100% of the issuing price, which is a lot lower than the current NAV.

Thx

mhalley
Posts: 7662
Joined: Tue Nov 20, 2007 6:02 am

Re: REIT- taking dividends in cash?

Post by mhalley » Sat Feb 23, 2019 2:47 pm

I’m not a fan of non traded securities. I would get rid of it, and the advisor that put you in it. If it is an Ira, the new tax law will have no effect as it applies to taxable accounts.

Valuethinker
Posts: 39066
Joined: Fri May 11, 2007 11:07 am

Re: REIT- taking dividends in cash?

Post by Valuethinker » Sun Feb 24, 2019 1:58 pm

nick evets wrote:
Sat Feb 23, 2019 12:03 pm
Years ago, we were sold 3 non-traded REIT's by our advisor. We've liquidated two (essentially breaking even), and retained the third because we hadn't held it long enough to avoid a redemption penalty. *If* I can believe the NAV it's grown impressively and generates $1k of dividends quarterly, which are reinvested (into more REIT shares). It's in her tax-advantaged IRA.

Since my wife is now 59, and we could use a bit of extra cash, is there any downside to asking the account holder to cancel the DRIP, and instead simply dump the cash into the account, and we'd start pulling it in 6 months? From what I understand, the new tax law would reduce the tax on the dividends from our regular income rates to about 19%.

The alternatives:
1) do nothing and sell something else in her IRA, but pay a higher tax rate.
2) sell X number of shares back to the REIT, under their redemption program, but they only pay 100% of the issuing price, which is a lot lower than the current NAV.

Thx
It is generally best to secure liquidity in bad investments as fast as you can. Sunk cost theory.

In this situation I would definitely not reinvest dividends. Tax or no tax. (I am not US based).

As soon as you can liquidate without penalties I would.

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