Equity Real Estate Investment Trusts invest in and at the same time own properties themselves. Their revenues come mainly from the rents of their properties. These trusts are different from the mortgage property investment firms, which provide mortgage loans to the buyers. They don't buy existing mortgages and mortgage backed securities. It buys and owns properties rather than investing in the mortgages. If you are investing in an equity real estate investment trust then you will get dividend income from the income earned by the investment trusts from their properties.
Real Estate Investment Trust is a company that operates income producing real estate such as apartments, offices, warehouses, shopping centers, and hotels. Though a variety of property types are there, most of the REIT concentrate on any one of the property types only. Those specializing in health care facilities are called the health care REIT. The real estate investment trust was formed in 1960 in order to make large scale income raising investments in real estate, which can be easily accessed by smaller investors. Real Estate Investment Trusts are, therefore, a special type of royalty trust. They specialize in real property, anything from office buildings to long-term care facilities. For liquid assets like real estate, closed-end funds of this type make good sense. Open-end or ‘mutual' real estate funds are subject to new money and redemption problems, entirely absent in closed-end trusts. The first Real Estate Investment Trust was introduced in the United States in 1960. The vehicle was designed to facilitate investments in large-scale income-producing real estate by smaller investors. These trusts are mainly classified into three categories: hybrid, equity and mortgage. The first category are those which own properties and also grant loans to owners of property. The second category consists of management and ownership of income generating properties. The mortgage investment trusts are those which provide money to owners of property by acquiring their loans and mortgage backed securities. These Real Estate Investment Trust are quite different from limited partnerships in several ways. One of the major difference is in the way to report the annual information on tax to their investors. Real Estate Investment Trust as a company manages the operations of income generating commercial properties like warehouses, hotels, shopping centers and apartments. Though there are different varieties of properties available, many of these REIT specialize and concentrate on any one kind of properties only. Those of these which have specialization in health care are known as health care REIT. These trusts were formed in 1960 to enable large scale investments in the property sector, which can then be accessed by individual investors. But the birth of Real Estate Investments Trust as a mass investment vehicle can be traced directly to the liquidity crisis encountered by open-end real estate mutual funds all the way back to 1991-92, during the slowdown of real estate that characterized those years. Faced with redemption demands on the part of unit-holders, real estate mutual funds were presented with the unpalatable option of selling valuable real properties into a distressed market to raise cash. Many of them, therefore, chose to close off redemption and converted into Real Estate Investment Trusts, since then most commonly known as REIT's. Only a few open-end real estate mutual funds continue to own real estate directly. Real Estate Investment Trust are broadly classified into three categories - equity, mortgage and hybrid. The first category involves the ownership and management of income producing real estate. Mortgage real estate investment trusts offers money directly to real estate owners by acquiring loans or mortgage backed securities. The third category not only owns properties but also provide loans to real estate owners and operators. Real estate investment trusts differ from limited partnerships in many ways. For a company to become a real estate investment trust, it should share out 90 percent or more of its taxable income to its shareholders once in a year. The risk involving in the investment in Real Estate Investment Trust depends on the type you choose. When it comes to investing in equity real estate investment firms there is a potential for investment returns because of- appreciations in the value of the owned property, inflation resulting in the driving up of rents unlike in stable mortgage returns, healthy dividend payments which increase over time, and there are profits whether it is from sale or buying of the properties. When it comes to the profits earned by the REIT, which give mortgage loans, they do produce significant returns but they carry added risks as they hold only debt instruments and not property.
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