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Total assets of these listed REITs exceed $400 billion. In exchange for easy liquidity, REIT sponsors focus on the benefit of not having to “time the market.” They often promote non-exchange traded companies as providing insulation from fluctuations in the market and, in part, as fixed-income investments that offer better returns than bonds, certificates of deposit, money market funds and similar financial instruments. About 20 non-exchange traded REITs are registered with the SEC but not traded on any of the public exchanges. Next, we’ll look at how REITs operate. If you have any queries with regards to wherever and how to use how much does it cost to buy a condo in thailand, you can make contact with us at our own web-site. Instead, they have private sponsors who market them to investors-often those who have been burned elsewhere in the market and seek relative stability.
REITs do have some disadvantages. Unfortunately, it is difficult for investors to predict what category of income a REIT will pay out in a given year (dividends or return of capital). Because their distributions to shareholders bypass corporate taxation, their dividends aren’t eligible for the 15 percent dividend tax rate that was put into place in 2003. That means investors usually pay taxes at their higher ordinary income rates, which can run as high as 35 percent. Nontaxable distributions are taxed as capital gains (currently 15 percent for shares held for more than a year) when shares are sold.
REITs are restricted in the types of services they can provide to tenants. Dividends the REIT receives from the TRS fall under the 95-percent income test. A TRS is a separate corporation in which a REIT has an interest. Additional tenant services, such as housekeeping services, must be offered through a Taxable REIT Subsidiary (TRS). TRSs pay corporate tax at regular rates on their taxable income. Other additional TRS rules include limits on the amount of interest and rents that the TRS can pay to the parent REIT.
Equity REITs are different from typical real estate developers because they purchase or develop real estate to operate it as part of their portfolios instead of developing it for resale. Rather than investing in properties, Mortgage REITs (MREITs) loan money for mortgages to real estate owners or purchase existing mortgages or mortgage-backed securities. Equity REITs are considered superior for the long-term investing because they earn dividends from rental income as well as capital gains from the sale of properties.
