|
You may want to include real estate in your investment portfolio but feel that you do not have the expertise, time or capital to find a rental property or fee generating real estate. Fortunately, there is an investment product that provides all the advantages of real estate including some favorable tax benefits. I am writing of course about a Real Estate Investment Trust (REIT--pronounced reet ) that can be bought or sold on major stock exchanges just as you would buy or sell any publicly-traded stock . So exactly what is a REIT? A REIT is a company that buys, develops, manages and sells real estate assets. Through a REIT, you can invest in a professionally-managed portfolio of real estate properties. For tax purposes, REITs qualify as pass-through entities. This means that a REIT is allowed to distribute the majority of its cash flows to investors without being taxed at the corporate level (providing that certain conditions are met). As a pass-through entity whose main function is to pass profits on to investors, the business activities of a REIT are generally restricted to generating property rental income. Specifically, a REIT must have at least 75 percent of its total investment assets in real estate and derive at least 75 percent of gross income from rents or mortgage interest. Compared to traditional private real estate ownership which take substantial time to liquidate, a REIT investment is remarkably liquid (converts easily into cash). This is primarily due to the fact that REIT shares are typically traded on major exchanges, making it easier to buy and sell REIT assets/shares than to buy and sell properties in private markets. A REIT generally falls into one of three categories:
Additional REITs information can be found at:
|
Reits
