Real Estate Investment Trusts (REITs)
Type of investment company that invests money in mortgages and various types of investment in real estate, in order to earn profits for shareholders. Shareholders receive income from the rents received from the properties and receive capital gains as properties are sold at a profit. REITs have been formed by a number of large financial institutions such as banks and insurance companies. The stocks of many of them are traded on security exchanges, thereby providing investors with a marketable interest in real estate investment portfolio. By law, REITs have to distribute 95 percent of their income to shareholders, and in turn they are exempt from corporate taxes on income or gains. In exchange for this special tax treatment, REITs are subject to numerous qualifications and limitations including:
- Qualified asset and income tests. REITs are required to have at least 75% of their value represented by qualified real estate assets and to earn at least 75% of their income from real estate investments.
- Shareholder qualifications. Generally, REITs are not permitted to be closely held and must have a minimum of 100 shareholders.
Popular Real Estate Terms
Latin term meaning something in exchange for something else. For example, a person rushes through an order for another in return for having first choice in selecting a parcel of ...
Latin term meaning legal capacity to act on behalf of oneself. ...
Records maintained as evidence of ownership of the home and any of its contents. ...
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Extended area of land commonly held for subdividing and development into residential units. ...
A provision not explicitly stated in an agreement, but considered as an important item. For example, the buyer of a home anticipates it to meet seller's claims as to condition and use. ...
Amount invested in property in cash. ...
Increase in the value of property caused by inflation. For example, John buys a home for $150,000. Because of inflation, the home is worth $200,000 five years later. The inflation equity in ...
Local zoning law or private limitation on how far in feet a structure might be situated from the curb or other appropriate marker. ...
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