Question

Objective: (1) Develop online research skills; (2) Discuss areas pertinent to investing in real property. Instructions: For this assignment, you will conduct online research on an area important to the subject of real estate investing. You may research either: tax laws or research Real Estate Investment Trusts. Please note as you start your research: Wikipedia is NOT a quality source. Even if you start there, DO NOT post a link to a Wikipedia article. Okay...here's what we are going to do, choose your own adventure: If you choose Taxes: There have been changes to the tax law recently. (The Jacobus textbook is very out of date.) Use your fine online skills to find an article explaining some of the changes. You might look for articles on what kinds of mortgage interest one can deduct, or if property taxes can be deducted. You might look for articles explaining passive and active investors, or specific tax shelters.

Answer 1

Real estate investment trusts (REIT)

Real estate investment trusts allow individual investors to buy shares in commercial real estate portfolios that receive income from a variety of properties, including apartment complexes, data centers, healthcare facilities, hotels, infrastructure, office buildings, retail centers, self-storage, timberland and warehouses.

To qualify as a REIT, a company must obey with various provisions in the Internal Revenue Code such as:

• Invest at least 75% of its total assets in real estate, cash or U.S. Treasuries
• Receive at least 75% of its gross income from rents from real property, interest on mortgages financing real property or from sales of real estate
• Pay a minimum of 90% percent of its taxable income in the form of shareholder dividends each year
• Be an entity that is taxable as a corporation
• Be managed by a board of directors or trustees
• Have a minimum of 100 shareholders after its first year of existence
• Have no more than 50% of its shares held by five or fewer individuals during the last half of the taxable year

There are certain types of REIT such as equity REIT, mortgage REIT, hybrid REIT etc.

Equity REIT are those which buy, own and operate income producing real estate. Mortgage REIT are those which provide mortgage on real property. Hybrid REIT own property also and make mortgages. It uses investment strategy of both equity and mortgage REIT.

It can also be classified as following types:

Publicly traded REIT - shares of which are listed on national security exchange where they can be brought and sold by investors. managed by SEC.

Publicly non traded REIT - Not traded on national security exchange but registered with SEC. Less liquid then publicly traded REIT but more stable as it is not affected by market fluctuations.

Private REIT - Not registered with SEC and don't trade on national security exchange.

some of the examples of REIT are:

Embassy office parks in Mumbai, India is proposing to raise over Rs 5,000 crore through this route. Embassy Office Parks will list 33 million square feet of office real estate portfolio under the REIT.

Nareit is the worldwide representative voice for real estate investment trusts—REITs—and publicly traded real estate companies with an interest in U.S. real estate and capital markets. Nareit advocates for REIT-based real estate investment with policymakers and the global investment community.

LInks:

https://economictimes.indiatimes.com/industry/services/property-/-cstruction/blackstone-teams-up-with-embassy-group-for-indias-first-reit/articleshow/65927273.cms?from=mdr

https://www.investopedia.com/terms/r/reit.asp

https://www.reit.com/nareit