| Entities that invest in different types of | | | | Mortgage REITs: This type of REIT typically |
| real estate or real estate related assets | | | | lends money to owners or developers and |
| such as commercial complexes, shopping | | | | invests in financial instruments that are |
| centers, offices, and hotels are known as | | | | secured through mortgages. Their main revenue |
| real estate investment trusts or REITs. These | | | | is interest earned from mortgage loans. |
| entities first came into being in the 1960's | | | | |
| to give people a chance for investing in | | | | Hybrid REITs: These are a combination of the |
| large-scale commercial properties. | | | | other two types of REITs. |
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| The internal revenue code has a list of | | | | Advantages of REITs |
| conditions, which a company must fulfill in | | | | |
| order to qualify as an REIT. Below is the | | | | 1.Investing in these trusts has the advantage |
| list of these conditions. | | | | of buying a physical asset and the prospect |
| | | | of increased returns due to appreciation in |
| 1.It must be structured as a corporation or a | | | | the rent. The market value of the properties |
| business trust. | | | | is another benefit. |
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| 2.It must be under the control of a board of | | | | 2.The income generated by the property is |
| directors and officers. | | | | shared among the shareholders and reassures |
| | | | them of their rights to the property. |
| 3.It must have a minimum of 100 shareholders. | | | | |
| | | | 3.Even a person with an average income can |
| 4.Shares should be fully transferable without | | | | own real estate without large down payments |
| any problems. | | | | or any hassles. |
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| 5.The company must invest 75 percent of its | | | | 4.Only one level of taxation is applicable to |
| total assets in real estate. | | | | income earned from REITs as the entity can |
| | | | avoid corporate taxes. |
| 6.It should generate 75 percent or more of | | | | |
| its gross income from investments in real | | | | People invest in REITs by purchasing shares |
| estate or mortgages in real estate. | | | | or by investing in mutual funds specializing |
| | | | in real estate. People investing in these |
| 7.Another condition is that it should pay 90 | | | | trust have a much more liquid investment. |
| percent or more of its taxable income to its | | | | Most of these trusts possess a 7 percent to |
| shareholders in the form of dividends. | | | | 10 percent dividend yield, making it |
| | | | profitable. |
| REITs may be held publicly or privately. If | | | | |
| they are publicly held they must be listed | | | | Investing in REITs is a way to buy stock from |
| with the SEC. | | | | a reputable and established entity. Only |
| | | | invest in these trusts after carefully |
| Types | | | | analyzing all aspects and understanding all |
| | | | risk factors involved. |
| There are three kinds of REITs: equity, | | | | |
| mortgage and hybrid REITs. Below are | | | | Additional Help |
| descriptions of each type. | | | | |
| | | | Various firms offer help to new entrepreneurs |
| Equity REITs: This is the most common kind of | | | | by offering their services and products to |
| REIT. This kind of entity owns or invests in | | | | help run the businesses efficiently. This |
| real estate and makes money from the rent it | | | | help includes software designed with small |
| collects. | | | | and large businesses in mind. |
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