With the real estate market on the rebound, people are asking how they can purchase equity commercial real estate has to offer without a large investment. Luckily, there is a solution and it is in the form of a REIT
REIT stands for real estate investment trust, which is a real estate company that is designed to resemble a mutual fund; it’s created to give people the opportunity to invest and make money in real estate, essentially giving some equity commercial real estate has to offer in the form of shares.
The answer is yes, there are many different types of REITs providing ways to obtain commercial real estate equity and they are used for different purposes. However, two REITs happen to be more popular than a handful of others offered in the marketplace. The two most popular types are equity REITs – or real estate companies that take over commercial properties to lease the space to tenants, and mortgage REITs – or mortgage-based investments that earn income from either the interest on the investment or the sales of the mortgages.
Being able to qualify for a REIT is complex. First, there needs to be an investment of no less than 75 percent of the assets into real estate, and at least 90 percent of the taxable income needs to be paid out as shareholder dividends, annually. The REIT also has to be taxable as a corporation, have a board of directors or trustees, and no less than 100 shareholders in the equity commercial real estate has to offer.
If REITs are required to dish out 90 percent of their taxable income, how do they generate any capital? They do so by collecting outside finances through IPOs, or initial public offerings, which is used to buy and maintain any and all real estate assets. The money that REITs garner comes from renting and selling property, which is then measured by FFOs, or funds from operations, which is the net income without any gains from property sales, with adjustments made for partnerships and joint ventures.
Although The Robert Weiler Company does not deal directly with real estate investment trusts, we’ve been around long enough to know whom you can speak to. In our various commercial real estate dealings, we often come across a variety of REITs that either buy or sell properties.
If you are seeking a larger investment, let the experts at The Robert Weiler Company help! You can perform a property search using our online tool to get an idea as to the available properties. Or we can personally assist you with your CRE needs at 614-221-4286. And if you’re interested in getting the best equity from your commercial real estate, we can steer you in the right direction.