Tuesday, March 8, 2011

How To Utilize REIT To Buy Real Estate

A real-estate investment trust is known by the acronym, REIT. Stockholders who have invested in property-investment corporations receive dividends, which signify profit gained from rent and other fees. REITs correspond negatively with the NASDAQ Composite Index and seem to do well when other stocks don't. They suffered greatly in the late 1990s, but have made a successful comeback in the bear market that began 10 years ago.

In 1960, Congress launched REITs, offering small investors the opportunity to invest in income-producing properties. Now, the REIT is well known in a lot of other countries aside from the United States including: Australia, Japan, and Brazil. Different countries have varying laws ruling the REIT including other real estate investment instruments.

REITs have their attraction with individual real estate investors as they offer the most direct way to buying property, eliminating some of the cost and difficulty that is often otherwise needless. Dividends are exempt from federal tax if they distribute at least 90% of taxable income to investors every year. Dividends can amass 8 to 9% per year and they offer predictability almost unheard of on today's market.

The inspiration for the design of REITs was synonymous to investment structure afforded by mutual funds. A pro rata percentage of the profits are offered to each shareholder. The stocks of most REITs are easily found on major stock exchanges. Dividends can be deducted from taxable corporate income via REITs. Capital gains and any taxes relating to dividends received must be accounted by an individual investor.

There were approximately 170 public REITs controlling more than $300 billion in 2009. Residential or commercial properties are often the target of these particular trusts. Handling the upkeep and administration of the properties within their portfolios is the function of some REITs, but there are others who do not get involved with these services and hire contractors to perform them.

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