REIT is actually real estate investment trusts. The people who wants to increase their net worth should invest in the real estates. But this is not a simple investment and not even a small investment but for investing in the commercial real estate, a large investment amount is needed. Due to this reason, many people leave the idea of the investing in the real estate but if you gather up a group of people to invest in this, then you could generate a greater income for these. But before investing in this, you must understand what real estate investment trusts is.
How does real estate investment trusts work?
There are number of corporations who are maintaining a list of the real estates. In this way, they give individual opportunity to invest in these properties without having any property of their own.
Less financial risk and more benefit:
The major advantages of the real estate investment trusts is the diversity and the liquidity which means that since the properties that you are investing in are not your belongings and you have a small amount of share in this, therefore, the amount of financial loss if any will be less. Moreover, you could sell these shares whenever you want to.
Introduction of the REITs:
In the age of the 1960, the people in the congress decides that the big businesses require more investors then they had already and to overcome this issue, they determined that the small investors should also be given the opportunities to invest in the commercial projects so that the investment and profits could be increased. A common principle of the business is that the company must distribute almost 90 percent of its income to the shareholders only then it could be qualified as the real estate investment trust in Australia. Some organization also distribute the entire 100 percent. This simplifies the process because the organization which is the real estate investment trust does not have to pay the income taxes anymore but the shareholders themselves need to pay the taxes on their total taxable income which avoids the concept of the double taxation because the rule of the taxation is removed on the corporate if the 100 percent of the income is divided among the shareholders.
What are the types of the real estate investment trusts?
There are many types of the REITs and some of these are listed here. The most common is the equity in which the organization buy the properties and put these on rent. The second is the mortgage REITs in which the money is lend to the real estate people. Other types include the public traded, hybrid and private REITs.