Real Estate Investment Trusts :: GCSE Business Marketing Coursework

Real Estate Investment TrustsA corpo palpable country investment trust, or REIT, is a company that buys, develops, manages and sells real estate of the realm assets. There are three types of REITs they are equity REITs, mortgage REITs, and loanblend REITs. An equity REIT is a corporation that purchases, owns and manages real estate properties it does not own or originate real estate loans. It may in addition develop properties. A mortgage REIT is a corporation that purchases, owns and manages real estate loans it does not own real estate properties. It may or may not originate commercial and/or residential loans. A hybrid REIT is a corporation that purchases, owns and manages both real estate loans and real estate properties. It has the qualities of both an equity and mortgage REIT which is why it is referred to as a hybrid. mavin of the most distinguishing characteristics of a REIT is that they are required to distribute at least 95% of taxable income to shareholders. RE ITs result participants to invest in a professionally-managed portfolio of real estate assets. This is important because prior to Congresss creation of REITs only extremely sizable individuals were able to benefit from ventures in the real estate market. By pooling assets together in a manner similar to that of a mutual fund, REITs allow the everyday investor the chance to invest in real estate properties. The of import benefit of a REIT is that it is exempt from double taxation. The normal corporation is taxed on earnings, and then when dividends are paid, the individual receiving the dividend is taxed. REITs can deduct dividends distributed from taxable income. This results in only one level of taxation. The main disadvantage of a REIT is that since around all earnings are distributed as dividends, the trust must name capital to reinvest into the business from other areas. These funds are usually raise by investments in the market, and through the capital gains real ized from the sale of the REITs assets.The back method by which REITs procure capital to reinvest into the business raises an accounting write up regarding the classification of assets. Currently, the buildings and property that REITs utilize to raise income are classified as property, plant, and equipment. However, it can be argued that these assets should be classified as inventory. The accounting translation of property, plant, and equipment specifies those properties of a durable nature used in the regular trading operations of the business.