Wednesday, 17 Jul 2024

Understanding Real Estate Investment Trusts (REITs)

shubhodeep prasanta das

A trust is a company that has been created to own a specific asset. In the real estate investment trust (REIT) case, the asset is usually real estate. There are thousands of REITs out there and they provide several tax benefits for investors, from low capital gains rates to being able to make passive investments.

What is a REIT?

A REIT is a company that owns income-generating real estate, with the primary purpose of earning profits through rent. REITs, like in shubhodeep prasanta das, are commonly listed on stock exchanges, making them publicly traded companies.

The REIT model was created in 1960 when Congress passed a law allowing ordinary investors to own and profit from real estate.  The law went into effect in February, 1962 when the first REIT, Equity Residential, was listed on the American Stock Exchange. They raised $10 million from investors and purchased a portfolio of properties that included 230 apartment buildings around the country.

Why own a REIT?

You get a lot of tax benefits. In general, REITs are taxed at a lower rate than other investments, like stocks. This means that your profits from the investments go straight to your bottom line instead of being taxed first at the federal, state and local level.

REITs tend to be passive investments that do not require a lot of maintenance or management on your part. You receive a monthly income check from your REIT and you’ll only have to make decisions about how to reinvest your funds or sell the properties.

REITs don’t pay corporate taxes, but they do pay dividends. You are eligible for some tax breaks on these dividends if you’re an investor in the company and you invest in REITs for the long term.

What are REITs good for?

REITs are a great way to gain exposure to the real estate industry. For example, you can invest in a REIT that is based in London and hold shares in properties all over the world. They offer diversification and broad exposure to international markets.

In addition, REITs are considered passive investments that are locked into a specific market. They offer stability that can’t be found from non-REIT stocks or bonds.