Real Estate Investment Company

Definition of "Real estate investment company"

Same as term real estate investment trust (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

Deterioration in property resulting from its ordinary use and from the aging process. An examples an apartment building that physically deteriorates over the years. ...

Extent to which soil has cavities or pores, thereby allowing water to pass through. soil productivity;Ability of the soil to accomplish the desired objective such as its capacity for ...

Divides a locality into districts for differing purposes. The map is continually kept current. It reveals the status of each district. ...

Same as term Veterans Administration Mortgage: Mortgage guaranteed up to 30 years by the Veterans Administration to veterans meeting minimum requirements. Originally established by the ...

Leasing commercial or industrial real estate can be a perplexing process. As a tenant (and as a landlord,) you must consider several aspects before actually signing the deal. Even top local ...

The term annuity due is a contract that demands payment at the beginning of each period. The most common example of an annuity due in real estate is rent when we consider that most ...

Regarding the definition of the term adjoining, we see a term used most often to describe a particular position that objects, items, or properties have regarding each other. In the case of ...

Same as term appraisal: Valuation assessment of real property by an expert third party for the following purposes: developing a realistic market price. setting a market value at the time ...

See quantity survey method. ...

Popular Real Estate Questions