REIT
Real estate investment trusts, known as REITs, are entities that invest in different kinds of real estate or real estate related assets, including shopping centers, office buildings, hotels, and mortgages secured by real estate. There are basically three types of REITS:
• Equity REITS, the most common type of REIT, invest in or own real estate and make money for investors from the rents they collect;
• Mortgage REITS lend money to owners and developers or invest in financial instruments secured by mortgages on real estate; and
• Hybrid REITS are a combination of equity and mortgage REITS.
The Internal Revenue Code lists the conditions a company must meet to qualify as a REIT. For example, the company must pay 95% of its taxable income to shareholders every year. It must also invest at least 75% of its total assets in real estate and generate 75% or more of its gross income from investments in or mortgages on real property.