Real Estate Investment Trust (REIT)Realized1031.com2019-06-03 08:00:00
Real Estate Investment Trust (REIT)
Real Estate Investment Trust is a trust or company that owns, finances, or invests in real estate and/or real estate-related assets. REITs provide individuals the ability to invest in a portfolio or larger properties in a similar manner to investing in stocks. REITs are “pass-through” entities, meaning that federal income tax is avoided at the entity or corporate-level provided that the REIT meets certain requirements including having at least 75% of its total assets in real estate and deriving at least 75% of its income from real estate-related activities including net operating income (NOI) from owning properties, interest receiving from mortgages and real estate-related loans or from sales of real estate. REITs must also distribute at least 90% of their income to investors in the form of dividends, have a minimum of 100 shareholders and have less than 50% of its ownership held by five or fewer individuals. The specific structure and strategy of REITs is fairly broad but generally fall into one of two categories - equity REITS, which primarily generate income from operating properties or mortgage REITS, which generate the majority of their income from loans or other real estate-related debt instruments. REITs may be public or private, traded or nontraded and may specialize is a specific property type such as apartments or office or may be diversified in their holdings.
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Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment.
Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested.
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