Definition of "Equity trusts"

Jennifer Dreggors real estate agent

Written by

Jennifer Dreggorselite badge icon

Berkshire Hathaway Executives

Same as term REIT: Type of investment company that invests money in mortgages and various types of investment in real estate, in order to earn profits for shareholders. Shareholders receive income from the rents received from the properties and receive capital gains as properties are sold at a profit. REITs have been formed by a number of large financial institutions such as banks and insurance companies. The stocks of many of them are traded on security exchanges, thereby providing investors with a marketable interest in real estate investment portfolio. By law, REITs have to distribute 95 percent of their income to shareholders, and in turn they are exempt from corporate taxes on income or gains. In exchange for this special tax treatment, REITs are subject to numerous qualifications and limitations including:

  1. Qualified asset and income tests. REITs are required to have at least 75% of their value represented by qualified real estate assets and to earn at least 75% of their income from real estate investments.
  2. Shareholder qualifications. Generally, REITs are not permitted to be closely held and must have a minimum of 100 shareholders.
There are three types of REITs. An equity trust invests their assets in acquiring ownership in real estate. Their income is mainly derived from rental on the property. A mortgage trust invests in acquiring short-term or long-term mortgages. Their income is derived from interest from their investment portfolio. A combination trust combines the features of both the equity trust and the mortgage trust. Their income comes from rentals, interest, and loan placement fees. Disadvantages of REITs are potential losses from the market decline and high risk.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

Founded in 1969 and located in West Palm Beach, FL, NACORE has 3,273 members. Its members consist of anyone managing, administering and/or operating regional real estate departments for ...

The arrangement of the walls and rooms in a structure. A two-dimensional horizontal scale drawing of the arrangements, size, and orientation of doors, rooms, walls, and windows of a single ...

There’s a time when it’s neither a Buyer’s Market nor a Seller’s Market. We call it “Renter’s Market”. It’s that time where, despite ...

Method of construction where vertical siding is attached to a horizontal framing structure. Often found in the design of agricultural buildings. ...

Some real estate sales require court confirmation of purchase to protect heirs and debtors from financial wrongs. These sellers have to sell their property due to unique circumstances. They ...

Wondering what “de facto” means? Well, because it’s a Latin word, let’s give a formal definition. De facto is Latin for indeed, in fact, in reality, actually. An ...

Expenditures incurred to initially purchase property, including incidental costs necessary to put the property into existing use and location. This cost is then depreciated over the assets ...

Right to peaceful enjoyment of property while the legal title is held by one person and the property is used by another. ...

Securing lease commitments to a building prior to its being available for occupancy. For example, a developer offers a discounted lease to potential tenants providing they agree to sign a ...

Popular Real Estate Questions