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
When you hear a real estate agent talking about a client that's an empty nester, it means said client suffers from empty nest syndrome. But what is Empty nest syndrome? Empty nest ...
Federal government agency monitoring and regulating corporate financial reporting and disclosure, use of accounting principles, auditing practices, and trading activities. Its regulations ...
Latin: now for then. Descriptive of actions which are performed after a deadline has elapsed, but retroactively have the same effect as if they were carried out in a timely manner. For ...
Loose combination of small rocks and pebbles used for a gutter, driveway, landscaping, or roadbed. ...
Company formed for the purpose of owning securities of one or more real estate corporations and assuming control over their practices and management. The other corporations are generally ...
A method of brick construction where the bricks are laid with their sides facing outward. ...
Amount received by a seller of real property in the form of credit rather than cash. Interest is typically received on the note. If a house is sold for $300,000 of which $100,000 is cash ...
Economic principle determining the market prices of goods, services, and property. The principle states there is a pricing relationship between supply and demand for real property. Economic ...
The Asset Depreciation Range (ADR) was introduced by the Internal Revenue Service (IRS) in 1971. It was designed to help businesses determine how long to use certain assets, like equipment ...
Have a question or comment?
We're here to help.