A Real Estate Investment Trust (REIT) Is A Company Set Up
To Invest In Real Estate Or Real Estate Mortgages. REITs
Are Similar To Mutual Funds Except, Instead Of Investing In
Stocks, REITs Invest In Real Estate.
A REIT is a company which owns and, in many cases, operates income-producing real estate such as apartments, offices, retail centers and warehouses. Some REITs invest in mortgages secured by real estate. Congress created REITs in the 1960’s to permit small and medium-sized investors the ability to make investments in large-scale, income-producing real estate.
To qualify as a REIT a company must have most of its assets and income tied to real estate investment. This may include owning real estate or mortgages secured by real estate. A REIT is designed so that multiple individual investors can pool their money and purchase real estate that they might not otherwise be able to purchase as individuals. Individual investors can thereby realize the benefits of ownership in larger investment grade real estate properties.
There are several rules that a REIT must comply with but one of the main rules is a REIT must distribute 90 percent of its taxable income to its shareholders annually. As a result, they often time carry higher dividend yields than many dividend paying stocks and US Government bonds.
Most REITs operate along a straightforward and easily understandable business model: By increasing property occupancy rates and rents over time, and continually managing expenses, higher levels of income may be produced. When reporting financial results, REITs, like other public companies, must report earnings per share based on net income as defined by generally accepted accounting principles (GAAP).
INREIT’s Consolidated Financials