Real Estate Investment Trust (REIT)Real estate was created when our hunter/gatherer ancestors decided hanging out in one spot was a good idea. The old method was to buy and sell the land to each other, but that was too cumbersome for the Wall street gang and they came up with the real estate investment trust. It is a security that sells just like a stock on just about any stock market. Similar in nature to a Mutual fund -- REITs are designed to allow a group of investors to pool their money to invest in a specific asset class. Much like regular dividend-paying -- preferred shares, they are a solid investment for investors looking for a regular income. Unlike going it on your own a real estate investment trust allows the average investor access to lucrative commercial rental income. The management of the REIT -- invests in real estate directly through either actual ownership of property or through mortgages. REITS get special tax treatment, because they are deemed to be a trust no corporate income tax is paid on the profits earned. Rather the net profit is passed through to the individual investors and taxed in their hands. Because of this REITs are required by law to disburse a minimum of 90% of their profit to their investors. In the case of a REIT -- an equity/mortgage combination. Gives those -- who may not have the financial wherewithal or temperament to hold their own real estate -- the opportunity to trade in real estate without the usual hassles. A REIT can be listed on a stock exchange, this makes it very liquid holding, easily sell-able. Unlike an actual real estate holding. Most developed countries allow real estate investment trusts to be bought and sold. The location where a REIT’s holdings are -- will have a large impact on the kind of return you can expect. Real estate values are down around the world, especially in the United States, because of this some REITs have fallen into disfavor. An Equity REIT can be a great way to earn rental income -- with none of the hassles of being a landlord. Other types of REITs allow you to earn income from mortgages, but also allow you liquidity not usually associated with mortgages. Canadian REITs started in 1993. They are configured as trusts and distribute net TAXABLE income to their investors. The 2007 changes made to income trust taxation does not affect REITs.
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