REIT stands for Real Estate Investment Trust. A
REIT is a company that owns and usually manages
income-producing real estate property such as
apartments, offices and industrial space. Along
with meeting additional criteria, to qualify as
a REIT the company must:
* pay at least 90% of its taxable income to its
shareholders every year.
* have at least 100 shareholders.
* invest at least 75% of its total assets in
real estate.
* derive at least 75% of its income from rent or
mortgage interest from properties in its
portfolio.
Congress established REITs in 1960 to provide
small investors with the opportunity to invest
in large, income-producing properties. The
stocks of most REITs are freely available on
major stock exchanges. They present investors
with an efficient method of investing in real
estate; each shareholder earns a pro rata
percent of the REIT's profits.
Perhaps one of the most attractive aspects of
REITs is the methods in which taxes are handled.
REITs are allowed to deduct dividends paid to
shareholders from their taxable corporate income
which can frequently remove all tax burdons.
Taxes are only paid by the individual investor
for the dividends received and any capital gains.
There are currently about 180 REITs that control
a total of over 300 billion dollars. Many REITs
focus on one particular type of property such as
residential or commercial. Some handle the
maintenance and management of the properties
within their portfolios whereas others use
contractors to perform this work.
