What You Should Know About Real Estate Investment Trusts


The real estate business currently is one of the most flourishing markets throughout the world; even a few years back the structure of the real estate scenario was not very well organized. The trusts concentrating in boosting the real estate business allow investors – by definition – to invest in real estates in a more manageable and effective way. They also act in providing securities to the real estate investor to buy property. Thus, the REIT helps in expanding the opportunities available to them.

Real estate investment trust (REIT) buy, manage, develop, and sell real estate and their basic aim is to distribute the majority of the earned money to the investors, without getting taxed at the corporate level. These tax benefits on real estate have been a great addition to the area of real estate asset benefits.

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Short history of REIT

Real estate investment trust was first created in the year 1960 by the US National Congress, but they played a very limited role in real estate for about three decades. In the first few years these trusts were a bit constrained because of the fact that were permitted to own real estate and were not allowed to operate or manage it, but later that changed and finally in 1992 they started to grow dramatically.

The primary benefit that these top real estate investment trusts had was that they were exposed to only one level of taxation, but the downside remained that the firm could retain only less than 10% of the income, so they have to rely heavily on the investors to pay off the shares.

Definition of REIT

Real estate Investments Trust is a form of a tax designation given to a corporation that invests in real estate and aims to reduce the corporate income taxes significantly. These are serious kinds of tax benefits on real estate andcan be only provided by these trusts. This organisation that is involved in owning and investing in real estate that includes apartments, shopping centres, office buildings etc. A trust of real estate investment, develops and operates properties and allows investors to put their money in professionally managed real estate, thereby increasing the real estate asset benefits.

Trusts looking after real estate businesses offer the investors a highly lucrative as well as efficient option to invest in real estate stocks; it also provides a road to make more money by investing in real estate. Most of the private real estate investment companies currently operating in the market use REITs to get access to a huge amount of capital from the public; this makes REITs a sort of mutual fund. The REITs can be easily compared to the mutual funds but the only difference lies in the fact that the investors and their cash remain invested into real estates rather than stocks of certain companies.

The United States real estate industry is undergoing a boom and for a company to qualify as a REIT, it must meet the following requirements:

  • It should be a corporation that falls under taxation.
  • The company must be managed by a board of directors or trustees
  • The shares of the company should be fully transferable
  • The firm should also have at least 100 shareholders.
  • The firm should invest at least 75% of its total assets into real estate.
  • The company is even required to pay at the least 90% percent of its taxable income as dividends to its share holders.

Every recent analysis indicates that real estate investment managing trusts are one of the finest ways of investing in real estate since they offer a greater amount of security than mutual funds. If you want to know what is the best REIT to invest in, well the answer to that will depend on how much capital you have and how much risk you are prepared to withstand. If you want to know how to start a REIT, then you can attend various seminars or join a real estate group or club that will show you a step by step approach.


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