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
The prepared form used to specify the terms of the listing contract. Usually a listing form consists of blanks the real estate agent fills in to provide the necessary information needed to ...
lender who charges an exorbitant interest rate, which is typically illegal because it exceeds the interest rate allowed in the state. A borrower may go to a loan shark if he cannot obtain ...
House designed and zoned for one-family use. Other dwellings may be attached to a single family dwelling, but do not share the same plumbing, heating, or electrical system. Single family ...
A loan in which the entire charge is subtracted up front from the face value of a loan. The proceeds received are the face value of the loan less this deduction, which increases the ...
Business organized as a distinct legal entity with ownership evidenced by shares of stock. To form a corporation, "articles of incorporation" must be filed with the state. When approved, ...
Federal tax legislation notably establishing 10% withholding on interest and dividends. ...
Organizational governing group. Either an appointed or elected body overseeing the management of an organization and rendering advice on current issues. Members are legally responsible for ...
Intermediate - to long-term collateralized loan granted to a business by a commercial bank, insurance company, or commercial finance company such as to finance the purchase of real ...
Partially amortized and requiring a lump sum (balloon) payment at maturity. ...
Have a question or comment?
We're here to help.