What is an REIT | Real Estate Investing

If you are new to REITs then you'll have a lot of questions. REiTs are a great way to invest in real estate you just have to know how to go about it.

What is an REIT? What all is involved with an REIT? ?These are questions you may have it you are new to real estate investing or REITs. ?The following article explains what exactly an REIT is and what many of the rules and regulations are when dealing with REITs. Check it out below.

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A real estate investment trust or REIT is really a company that invests generally in real estate successful properties. It?s quite common for a REIT to invest in real-estate that can offer a positive revenue for instance such as office buildings, apartments or condos, shops, and regional malls. Financing real estate by means of loans can also be an investment which a REIT might make.

The country/location which the REIT operates in will establish the factors needed for the business to work being a REIT. Many prerequisites will have to be fulfilled in the U.S.A ?for an organization to operate being a REIT.

Particularly:1) Be set up being a corporation, trust, or association. 2) It must give a minimum of ninety percent of the company?s earnings yearly by means of dividends to its shareholders.3) 100 persons or even more will have to own the REIT.

4) At minimum 75 percent of the company?s assets have to be dedicated to real-estate.5) The income from the rents or mortgage interest from the properties which the REIT owns will have to bring in not less than seventy five percent of the company?s gross income.

Currently you can find around two hundred and fifty businesses that are set up as a REIT and the vast majority are bought and sold publicly in major stock markets and the rest are kept private. Future investors that are looking to make investments in real-estate and do not desire to turn into landlords could have the chance to invest in income properties by means of a public REIT. In contrast to being the owner of traditional physical real-estate, investors can buy or sell a REIT without making use of a realtor.

A percentage of the REITs profits are owned by each shareholder normally by way of dividends.?Listed below are the three varieties of REITs:

A REIT that owns, purchases, and manages real-estate properties is recognized as an Equity REIT. Its type of income comes from its biggest investments which are usually rental income properties who have a positive cashflow from rents.

A REIT which lends, buys, and owns real-estate loans is named a Mortgage REIT. Earnings are created from interest acquired by way of mortgage loans.

A Hybrid REIT contains the traits connected with an equity and mortgage REIT, hence its term being hybrid. It buys, owns, as well as manages both real-estate properties as well as real estate loans.

The fact that a REIT may substantially lessen and sometimes eradicate corporate taxes is its most significant appeal to the business. The REIT accomplishes this as a result of subtracting the dividend it pays to shareholders from the organization?s taxable corporate income. Shareholders enjoy the advantage of obtaining a dividend 4 times more than some other stocks.

REITs present you with a greater rate of return reducing overall potential risk to a portfolio resulting from diversification. Typically the shareholders pay taxes on capital gains plus income created from the dividends they receive.

Making an investment in a REIT by way of including one to your existing investment portfolio is highly advised. Furthermore, for anyone who is undecided with regards to buying rental property, give consideration to an equity REIT. As an alternative to undertaking the potential risk of a particular location and specific property, you?ll invest in many properties in various locations/cities lessening general investment risk.

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Article by Taline

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Source: http://realestateinvesting.com/blog/2012/02/17/what-is-involved-in-an-reit/

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