|
Real Estate Investment Trusts: Structure, Analysis and Strategy
Mortgage Real Estate Investment Trust REIT
A leveraged investment trust that makes loans to builders and mortgage loans to buyers of real estate are known as Mortgage REITS.
A REIT is a closed end fund that invests in real estate activities. They can invest in direct property or mortgage loans and related product. They can trade on a stock exchange or OTC and pay regular dividends to shareholders.
Most brokerage firms and financial advisor companies have many choices in the Mortgage REIT area or real estate trusts.
Dividends
Since these trusts invest in mortgage related investments, the dividend rate is considered good current income to the investor.
Trading
While the investments withing the mortgage REIT are fixed income and guaranteed, the price value of the trust shares themselves are largely based on supply and demand within the trading stock market. The real estate market itself is also a major factor. Since this is a generalized industry, all property related investments tend to move with the broader real estate market itself.
The trading value will tend to increase or decrease within that trend.
Taxation
REIT's are regulated under Subchapter M of the IRS code. If the trust qualifies under Subchapter M, it does not pay tax on the distributed net income. The distributions flow to the shareholders, who then pay the tax on their personal taxation forms.
To qualify as a Mortgage REIT or any real estate investment trust on a taxation basis, they must meet these 4 catagories:
At least 75% of income must be related to real estate or mortgage
At least 75% of the assets must be in real estate
At least 90% of the net investment income must be distributed to REIT holders
Cash dividends paid by Mortgage or other real estate trusts do not qualify for a lower tax rate.
Copyright  2006 American Investment Training, Inc.
|
