Forming Or Investing In A Real Estate Trust
If you’re thinking about buying income-producing property, don’t leave anything to chance. Before you act, consider contacting a qualified and experienced real estate attorney and experienced tax attorney. Your attorney can advise you on setting up a Real Estate Investment Trust (REIT) to ensure you get the most for your investment. Your attorney can also advise you on tax and other considerations if you’re thinking of investing in a REIT.
A REIT is a separate entity (a company) that own(s) or finances income-producing real estate property. The property can be homes, condominiums, offices, apartment buildings, warehouses, hotels, hospitals, shopping centers, forests (timberland) and even a golf course. The REIT is very similar to mutual funds, but instead of stocks, the REIT will have a portfolio of commercial or residential property or mortgages. Investors can buy shares of a REIT just as they would buy shares in a company or a mutual fund. Setting up a REIT allows both small and large investors be able to ‘own’ and receive an income from real estate properties.
From a Trust level, a REIT can offer a very good tax-efficient way to own real estate. At this level, REITs are tax exempt provided they pay at least 90% of their profits to shareholders. Again, your real estate-tax attorney will be able to advise you on the advantages of a REIT.
Investing in a REIT is an advantage to investors because it offers all the benefits of owning real estate without the expense or headaches that come with being a landlord. The REIT can give investors a nice stream of income and a special tax consideration.
REITs have been around for more than fifty years when Congress granted the legal authority to form them in 1960. During the 1970s, REITS accounted for much of the growth during that housing boom. REITS are now available in all 50 states as well as other countries. Some REITS are listed on the U.S. Securities and Exchange Commission (SEC) and public while some are private.
There are many kinds of REITs, but the three main kinds are: Equity, Mortgage and Hybrid. The Equity REIT allows you to invest in and own properties. Money earned in an Equity REIT mostly comes from leasing space to tenants. The revenues from the rents are then distributed as dividends to shareholders. The Equity REIT can sell a property that the capital appreciation is then reflected in the dividends. A timber REIT includes capital appreciation from the sale of timber in the dividends. The Mortgage REIT owns and invests in mortgages. The Mortgage REIT will loan money for mortgages to owners of real estate, purchase existing mortgages or mortgage-backed securities. Revenue from the Mortgage REIT is primarily generated from the interest earned on the loans. 3) The Hybrid REIT owns and invests in both properties and mortgages. There’s also a Captive REIT that capitalized on a favorable tax consideration. Rent paid from stores or branches is paid to the Captive REIT by a parent company that will deduct the rent as a business expense, reducing the taxable income.
If you’re interested in investing in, or setting up a REIT please call our office to set a consultation with one of our attorneys who specializes in REITS and the tax consequences. Gantenbein law Firm's attorneys are experienced in real estate, tax and trusts and can assist with all issues in forming a real estate investment trust. To schedule a consult, call 303-618-2122.
A REIT, or real estate investment trust, may be the most tax- beneficial way to purchase and hold real estate investments.
The experienced real estate, tax and trust attorneys at Gantenbein Law Firm can help.
To schedule a consult, call 303-618-2122.