ETF Inspector

Real Estate Investment Trusts (REITs) are an investment vehicle allowing access to real estate income in stock form. REITs don't generally pay federal income tax, but instead pass most earnings onto shareholders as dividends. Given their easy accessibility, does it make sense to add another layer of bureaucracy (and expenses) by owning a REIT fund?

Maybe. There are almost 200 publicly traded REITs in the United States, and another 800 privately owned ones. Additionally, they can make their money in a variety of ways (and a variety of locations), from rental income to leveraged mortgages.

But perhaps the best argument for buying a REIT fund is if you can get it at a discount.

ING Clarion's Real Estate Income Fund (IIA) and Neuberger Berman's Real Estate Income Fund (NRL), Real Estate Securities Income Fund (NRO), Realty Income Fun (NRI) are all currently trading at discounts of 10-12%, with market yields of 4.7-7.3%. Each fund is diversified with 73-99 holdings (there is a fair amount of overlap between them, though). If you're not convinced that the real estate bubble is about to burst, these funds may be a good way to get real estate diversification at a discount.

Fund	Price	NAV	Discount	Yield
ING Clarion Real Estate Income Fund (IIA)	$18.95	$20.95	9.55%	7.28%
Neuberger Berman Real Estate Income Fund (NRL)	$29.09	$32.51	10.52%	4.74%
Neuberger Berman Real Estate Securities Income Fund (NRO)	$18.98	$21.65	12.33%	6.32%
Neuberger Berman Realty Income Fund (NRI)	$25.66	$28.84	11.03%	5.26%

Prices/yield as of February 26, 2007.