A real-estate investment trust is known by the acronym, REIT. Revenues gleaned from rent and other fees comprise the dividends paid to stockholders who have invested in property-investment companies. REITs correlate negatively with the NASDAQ Composite Index and seem to do well when other stocks don’t. During the late 1990s, REITs took quite a hit, but they have rallied and flourished during the bear market initiated some ten years ago.
In 1960, Congress introduced REITs, offering small investors the chance to invest in profit-producing properties. Australia, Japan and Brazil are all familiar with REITs. REITs are not the only real estate investment vehicles available in these countries but all are dependant on the various laws in effect in each nation.
Due to the fact that REITs offer the most direct means to buying property and avoiding expensive hassles, they are very attractive to individual real estate investors. As long as they distribute at least 90% of taxable income to investors annually, dividends from REITs are exempt from federal tax. REITs offer predictability in a fluctuating market and dividends can amass 8 to 9 % per year.
Originally, these trusts were designed to provide a similar investment structure as that afforded by mutual funds. They offer each shareholder a pro rata percent of profits. The stocks of most REITs are easily found on major stock exchanges. Tax wise, REITs permit the deduction of dividends from taxable corporate income. An individual investor is only accountable for those taxes concerning dividends received and any capital gains.
There were an estimated 170 public REITs controlling more than $300 billion in 2009. Residential or commercial properties are often the focus of these particular trusts. Handling the maintenance and management of the properties within their portfolios is the function of some REITs, but there are others who do not get involved with these services and hire contractors to perform them.
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