Real Estate Investing Information Blog

A Real Estate Investment Trust or REIT is a tax name for a corporation investing in real estate that reduces or eliminates business income taxes. The REIT construction was designed to provide an identical structure for investment in real estate as common funds supply for investment in stocks.

United States REITs
In the U.S., Real Estate Investment Trusts normally pay little or no central income tax, but are topic to a number of individual requirements set forth in the Internal Revenue Code, one of which is the obligation to annually distribute at least 90% of its chargeable income in the form of dividends to its shareholders.

In new practice, many Real Estate Investment Trusts distribute all of or still more than their present earnings, often ensuing in dividend yields similar to bond yields. If an investment company such as a REIT distributes additional than its taxable income, the surplus distribution is measured "return of capital" for tax purposes. The distribution condition may hamper a Real Estate Investment Trusts aptitude to retain earnings and generate enlargement from internal resources. This and other limits imposed by the Internal Revenue Code normally limit a Real Estate Investment Trusts suitability for growth-oriented investors. However, other considerations may consequence in potential for stock price agreement, such as improvements in the REITs underlying leasing markets, changes in interest rates or growing demand for REIT stocks.

United Kingdom REITs
The legislation laying out the policy for UK Real Estate Investment Trusts is outstanding to be enacted in the Finance Act 2006 and will approach into effect in January 2007.UK Real Estate Investment Trusts will include distributing 95% of profits. They must be a close-ended investment faith and is UK occupant and publicly listed on a supply exchange documented by the Financial Services Authority.