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What is a REIT REIT stands for Real Estate Investment Trust and is a company that buys develops manages and sells real estate assets REITs allow participants to invest in a professionally managed portfolio of real estate properties REITs qualify as pass-through entities companies who are able to distribute the majority of income cash flows to investors without taxation at the corporate level Public real estate investment trusts REITs are tax-advantaged corporations that own real estate properties or invest in loans that are secured by such properties These organizations are tax-exempt provided that they satisfy certain provisions of the Internal Revenue Service Tax Code The most significant of these requirements are 1 at least 95 of net taxable income must be paid to shareholders as dividends 2 at least 75 of total assets must be related to real estate property and 3 at least 75 of gross income must be derived from property rents or mortgage interest Public REITs are generally classified into three categories equity mortgage and hybrid Equity REITs which represent more than 90 of the total market capitalization of the REIT universe invest directly in real estate properties Mortgage REITs invest in real estate mortgages and construction loans while hybrid REITs own both equity and debt Within these broad categories REITs will typically focus their investments on a single property sector I believe that REITs are a sound investment alternative that over longer periods should provide attractive money earnings performance as part of a multi-asset portfolio which is key when all you invest in is the stock market
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