Difference between revisions of "Real Estate Investment Trust (REIT)"

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A REIT (Real Estate Investment Trust) invests directly in [[real estate]], either through properties or [[mortgages]], and is traded as a [[security]] on a [[stock exchange]]. REITs tend to offer investors high [[yield]]s, and they receive special tax considerations.
REIT stands for Real Estate Investment Trust. A REIT invests directly in real estate, either through properties or mortgages, and is traded as a security on a stock exchange. REITs tend to offer investors high yields, and they receive special tax considerations.


*Equity REITs invest in and own properties. Revenue comes principally from their properties' rents.
*Equity REITs invest in and own properties. Revenue comes principally from their properties' rents.
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*Mortgage REITs deal invest in property mortgages. They lend money for mortgages to owners of real estate, or purchase existing mortgages or mortgage-backed securities. Revenues come primarily from the interest that they earn on the mortgage loans.
*Mortgage REITs deal invest in property mortgages. They lend money for mortgages to owners of real estate, or purchase existing mortgages or mortgage-backed securities. Revenues come primarily from the interest that they earn on the mortgage loans.


*Hybrid REITs invest in both properties and mortgages.  
*Hybrid REITs invest in both properties and mortgages.


Individuals can invest in REITs by buying [[share]]s on an [[exchange]] or by investing in a [[mutual fund]] that specializes in real estate. REITs usually pay [[dividend]]s and often offer [[dividend reinvestment plan]]s. Some REITS invest in a specific type of real estate, such as shopping malls or office buildings, or in one specific region.<ref>{{cite web|url=http://www.investopedia.com/terms/r/reit.asp|name=Real Estate Investment Trust (REIT)|org=Investopedia|date=May 19, 2009}}</ref>


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To qualify as a REIT in the U.S., a company must comply with certain rules specified in the Internal Revenue Code. These include: investing at least 75 percent of total assets in real estate; deriving at least 75 percent of gross income as rents from real property or interest from mortgages on real property; and distributing annually at least 90 percent of taxable income to shareholders in the form of dividends.<ref>{{cite web|url=http://www.reit.com/AllAboutREITs/tabid/54/Default.aspx|name=All About REITs|org=NAREIT|date=May 19, 2009}}</ref>


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Congress created REITs in the U.S. in 1960 as a way to make investment in large-scale, income-producing real estate accessible to all investors in the same way they typically invest otherwise – through the purchase and sale of liquid securities. Before listed real estate equities were created, investing in commercial real estate equity as a core asset was limited to institutions and wealthy individuals with the wherewithal to invest directly in real estate.<ref>{{cite web|url=http://www.reit.com/AllAboutREITs/tabid/54/Default.aspx|name=All About REITs|org=NAREIT|date=May 19, 2009}}</ref>
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== References ==
== References ==
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[[Category:Investments]]
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Latest revision as of 22:05, 15 August 2011


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A REIT (Real Estate Investment Trust) invests directly in real estate, either through properties or mortgages, and is traded as a security on a stock exchange. REITs tend to offer investors high yields, and they receive special tax considerations.

  • Equity REITs invest in and own properties. Revenue comes principally from their properties' rents.
  • Mortgage REITs deal invest in property mortgages. They lend money for mortgages to owners of real estate, or purchase existing mortgages or mortgage-backed securities. Revenues come primarily from the interest that they earn on the mortgage loans.
  • Hybrid REITs invest in both properties and mortgages.

Individuals can invest in REITs by buying shares on an exchange or by investing in a mutual fund that specializes in real estate. REITs usually pay dividends and often offer dividend reinvestment plans. Some REITS invest in a specific type of real estate, such as shopping malls or office buildings, or in one specific region.[1]

To qualify as a REIT in the U.S., a company must comply with certain rules specified in the Internal Revenue Code. These include: investing at least 75 percent of total assets in real estate; deriving at least 75 percent of gross income as rents from real property or interest from mortgages on real property; and distributing annually at least 90 percent of taxable income to shareholders in the form of dividends.[2]

History[edit]

Congress created REITs in the U.S. in 1960 as a way to make investment in large-scale, income-producing real estate accessible to all investors in the same way they typically invest otherwise – through the purchase and sale of liquid securities. Before listed real estate equities were created, investing in commercial real estate equity as a core asset was limited to institutions and wealthy individuals with the wherewithal to invest directly in real estate.[3]

References[edit]

  1. ↑ Real Estate Investment Trust (REIT). Investopedia.
  2. ↑ All About REITs. NAREIT.
  3. ↑ All About REITs. NAREIT.
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