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INVESTING IN REITs PART 2

Bây giờ bạn có một cảm giác chung của REITs là gì và làm thế nào họ so sánh với khoản đầu tư khác, chúng ta hãy có một cái nhìn gần hơn vào cấu trúc của REITs và làm thế nào họ đã thích nghi với điều kiện thay đổi trong những năm qua. | 42 INVESTING IN REITS Now that you have a general sense of what REITs are and how they compare to other investments let s take a closer look at the structure of REITs and how they ve adapted to changing conditions over the years. THE FIRST REIT The REIT was defined and authorized by the U.S. Congress in the Real Estate Investment Trust Act of 1960 and the first REIT was actually formed in 1963. The legislation was meant to provide individual investors with the opportunity to participate in the benefits already available to large institutional investors of owning and or financing a diversified portfolio of commercial real estate. gms nlllllll The avoidance of double taxation is one of the key advantages to the REIT structure. A key hallmark of the REIT structure is that the REIT can deduct from its taxable income all dividends paid to its shareholders thus the REIT pays no corporate taxes if it distributes to shareholders all otherwise taxable income. By law however it must pay out at least 90 percent of its net income to its shareholders. The shareholders of course must pay income taxes on the dividends unless the REIT shares are held in an IRA 401 k or other tax-deferred account. Often however a portion of a REIT s dividend is not immediately taxable as we ll see later. THE TAX REFORM ACT OF 1986 The tax reform act of 1986 was a significant milestone in the REIT industry as it relaxed some of the restrictions historically limiting REIT activities. Originally management was legally obliged to hire outside companies to provide property leasing and management services but a REIT is now allowed to perform these essential services within its own organization. This change was highly significant because imaginative and efficient leasing and property management are key elements in being a successful and profitable property owner. Most of today s REITs are fully integrated operating companies that can handle all aspects of real estate operations internally