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