A REIT, or real estate investment in trust, is an entity that owns, operates, or finances real estate that produces income. The REIT structure allows the corporation to avoid paying corporate taxes on earnings. A REIT makes it possible for investors to get dividends from investments in real estate without personally buying, managing, or financing any properties personally.
Most REITs lease space and collected on the properties, then distributing the dividends to its owners. Mortgage REITs earn interest from the financing of real estate. The internal revenue code requires that REIT distribute income by primarily owning income-generating real estate. Among other things, at least 75% of the REIT assets should be in cash, real estate, or U.S. Treasuries. Also, the real estate investment trust must get at least 75% of its income from rents, interest on mortgages that finance the real property, or the sale of real estate.
Usually, a REIT starts as a limited liability company or partnership, designating the amount of ownership. A corporation REIT must have at least 100 investors after its first year of operation. An offering prospectus must include information on the REIT managers, properties, and investment strategies. You will then need to amend your certificate of incorporation when you have 100 investors. Then your corporation will be recognized as a REIT as long as it continues to operate under the guidelines required for real estate investment trusts.
We help clients tackle the issues involving REITs, which are complex matters that usually involve financing, constructions, development, leasing, and environmental issues. Our Waco business lawyers have extensive experience with real estate and the formation of REITs. We are capable lawyers experienced in REIT financing, real estate joint ventures, real estate leasing, land use, and development, like-kind exchanges, REIT workouts, and restructurings.
Our business lawyers in Waco are highly experienced in real estate transactions involving commercial and residential matters. If you want to discuss your formation of a REIT or your investment in a REIT, please contact a Waco business lawyer about your REIT at 254-753-6437.
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