Real Estate Investment Trusts: Ultimate Guide to REIT

Real estate investment may be a viable alternative for those with an eye for the long term. Unfortunately, investing in property requires a sizable sum of money upfront. Zillow estimates that the national median value of a home is $357,544. Most lenders require a minimum deposit of 20%.

REITs allow every investment-minded person to make money off valuable real estate, giving them access to dividend-based income and total returns (that may otherwise be out of reach) without buying, managing, or paying for a property.

Real Estate Investment Trusts

Real estate investment trusts (REITs) are companies whose primary business is to generate profits for their investors and shareholders by managing diversified portfolios of real estate and mortgage assets.

REITs Defined

Rental, leasing, and eventual sale of the properties are the means through which REITS generates revenue. A REIT is not in the business of building real estate and selling it. 

1. Real estate investment trusts (REITs) must be taxed like corporations, not partnerships or individuals. 2. A diversified collection of investors must possess REITs, and no one person or entity may control above 50% of the company's outstanding shares.

How Companies Qualify as REIT

3. Real estate and assets associated with real estate, such as mortgages on real estate, must make up at least 75% of a REIT's assets. 4. Rents from real estate, interest on mortgages securing real estate, or real estate sales must account for at least 75% of a REIT's gross income.

How to Invest in REIT Anyone can buy listed shares of the REIT on the stock market by purchasing through a broker. For non-traded (REIT), you'll need to buy through a broker authorized to sell the REIT's shares. 

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