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The abbreviation REIT stands for Real Estate Investment Trust. A REIT is a corporation or trust that buys and manages shares in a real estate portfolio, direct real estate or real estate loans. A REIT that buys and manages income properties is known as an equity REIT, while a REIT that purchases mortgage loans is referred to as a mortgage REIT. Often an equity REIT will invest in apartments, retail shopping centers and commercial office buildings. Like other companies, a REIT often trades on a major stock exchange. The pooled capital of many investors is used to buy assets under the REIT. In turn, the REIT earns profits for its shareholders through rents and capital gains. Certain tax advantages are offered to a REIT, dictated by applicable federal and state laws and procedures. For example, a REIT may bypass corporate income tax if it distributes at least 95% of its taxable income to shareholders annually. A REIT is usually managed by one or more trustees, who hold the title to the assets of the REIT and direct future investments. In general, a REIT can be one of three types: a listed public REIT, an unlisted/non-exchange traded REIT or a private REIT. The United States Congress created the REIT concept in 1960. |
