Real Estate Investment Trusts (REITs)

**Waterfront Specialist** · 08-03-2010, 12:10 AM

Hi..

Looking for an income security that rivals small-cap stocks? It may be time to learn about real estate investment trusts

Types of REITs

There are three kinds of REITs: equity, mortgage and hybrid REITs. Below are descriptions of each type.

Equity REITs: This is the most common kind of REIT. This kind of entity owns or invests in real estate and makes money from the rent it collects.

Mortgage REITs: This type of REIT typically lends money to owners or developers and invests in financial instruments that are secured through mortgages. Their main revenue is interest earned from mortgage loans.

Hybrid REITs: These are a combination of the other two types of REITs.

Advantages of REITs

Investing in these trusts has the advantage of buying a physical asset and the prospect of increased returns due to appreciation in the rent. The market value of the properties is another benefit.

The income generated by the property is shared among the shareholders and reassures them of their rights to the property.

Even a person with an average income can own real estate without large down payments or any hassles.

Only one level of taxation is applicable to income earned from REITs as the entity can avoid corporate taxes.

**urleandy** · 08-03-2010, 10:40 PM

Great information. Shares in a REIT are publicly traded on stock exchanges, and as such present an opportunity for individual investors to hold a variety of property assets. REITs are eligible for corporate income tax exemptions, and in return, REITs are required to distribute 90% of their income in the form of dividends to their shareholders each quarter.