Page 5 - IreitEbook

CHAPTER 1:

A real estate investment trust, or REIT, is a legally recognized business structure

that makes money by owning or financing property.

If that sounds like any old apartment complex, don’t worry. It’s a little

more noteworthy than that. Actually, it’s a lot more noteworthy than that –

particularly if you’re an investor looking to build up safe, secure income toward

your retirement.

REITs can center around apartment complexes, it’s true. But they can just as

easily involve medical facilities, office buildings, shopping centers, and utilities.

Plus, they come with an extremely specific tax structure built to benefit both

them and their investors.

Let’s explain…

First legally created decades ago through the Real Estate Investment Trust Act

of 1960, REITs do not pay any corporate income tax. And no, the IRS doesn’t

come after them for that fact. It’s all aboveboard.

This special treatment does come with a catch, however. In order to escape the

normal business tax burden, these entities have to pay out at least 90% of their

otherwise taxable income to investors in the form of dividends.

That’s the most well-known – and tempting – attribute about REITs. But there

are other requirements they must meet in order to qualify. According to the U.S.

Securities and Exchange Commission (SEC), a REIT must also:

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