Real Estate Investment Trusts
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Here is the essence of real estate investment trusts -- unless you're flying through the air or on (or in) a large body of water, you're occupying what's called "real estate." It included all kinds of buildings, the land they're on, and land without buildings. That is, nature -- both undeveloped wilderness and farmland or cultured woods.
REITs started in the U.S. as a 1960 law, The Real Estate Investment Trust Act of 1960, part of the Cigar Excise Tax Extention Act of 1960 signed by President Dwight D. Eisenhower because Congress wanted to give small investors a chance to profit from commercial real estate as wealthy individuals and institutions have traditionally done. The first one was set up in 1963. It allowed investors to pool their money to acquire ownership interest in real estate properties, without having to own real estate directly -- especially commercial real estate.
Until then, individuals had to own real estate directly. However, it could be difficult for them to raise enough money to buy a second house or apartment building. Plus, those who did so needed a variety of skills to make the investment profitable, and they were still at risk from business conditions in their local area. Not to mention having to fix toilets at 2 o'clock in the morning.
So far as I can tell, this U.S. law was the first in the world. Since then, the REIT concept with variations had spread throughout the world: REITs can be found in Canada, the U.K., Belgium, France, The Netherlands, Australia, Germany, Japan, Singapore, Hong Kong, Bulgaria, India, and others.
There are now about 190 real estate public securities registered in the U.S.
You can buy shares in private REITs which are sponsored by various real estate businesses and sold to investors by financial planners. However, they are not liquid, because they're not traded on an exchange. They carry large commissions (publicly traded REIT shares are available from deep discount online brokers). Plus, the sponsors also make big money from fees.
Two Types of REITs in the United States:
Equity REITs -- These REITs are actually in the real estate business. They buy, develop, manage and sell commercial properties. Most real estate investment companies are of this type, and they're what most people mean when they speak or write about real estate investment trusts REITs.
Mortgage REITs -- Mortgage real estate investment trusts make their money by making mortgage loans and investing in them. With the current U.S. subprime mortgage loan disaster threatening to throw the entire country (and possibly the world) into a recession, you'd probably better think twice (and a third time, and a fourth time if you still feel tempted), before buying shares of one of these. Only about 10% of U.S. REITs are of this type.
Some real estate companies have chosen be publicly traded companies, or C corporations, but not to elect the tax status of REITs. These are known as real estate operating companies, or REOCs. Therefore, a REOC is not required to pay any dividends, just like other companies listed on a stock exchange. Therefore, the share price of a real estate operating company is more volatile, because there's no immediate reward for investors.
Canada has latched on to the concept of real estate investment trusts, and now Canadian REITs are one of the larger REIT markets in the world behind the U.S.
Australia is the number two REIT market behind the United States, with 12% of the total REITs in the world. Australian Real Estate Investment Trusts or A-REITs have some differences due to differences in the law. They are still allowed to be stapled entities, they're allowed to run their own funds like a mutual fund family, and their trustees and management are combined into one Responsible Entity
France adopted a REIT law in 2003, but in French they're known as societes d'investissements immobiliers cotees or SIIC.
The United Kingdom began having Real Estate Investment Trusts January 1, 2007.
Singapore has had Real Estate Investment Trusts (S-REIT) for nearly ten years, and so is an active real estate listing exchange for Asian companies.
Brazil has a form of real estate company that is known as Fundos de Investimentos Imobiliaro or FII>
In 2007 Germany also passed its version of Real Estate Investment Trusts, also known as G-REITs.
Real estate is important in cramped Hong Kong, so you can also find Hong Kong Real Estate Investment Trusts.
Japan is also a small country so real estate is important there too, and so there are many listed Japanese Real Estate Investment Trusts or J-REITs.
In Greece you can buy Real Estate Investment Companies or Greek REICs.
SICAFI Immobiliere are Real Estate Investment Trusts in Belgium.
Societa di Investimento Immobiliare Quotate or SIIQ is the term for REITs in Italy.
Fiscale Beleggingsinstelling (FBI) is the term for Real Estate Investment Trust in The Netherlands, or Fiscal Investment Institution in English form.
All investing sectors have indexes to track their overall performance, and so there are many Real Estate Investment Trust indexes.
New Zealand Real Estate Investment Trusts -- despite having no specific REIT laws, some companies can invest in real estate and avoid taxation.
Bulgarian Real Estate Investment Trusts or Special Purpose Investment Companies or SPICs -- how SPICs can invest in Bulgarian real estate.
Real Estate Investment Trusts in the United Arab Emirates -- a Shariah-compliant REIT (I-REIT) was recently launched in Dubai.
Real Estate Investment Trusts in Argentina or Fideicomiso Financiero Inmobiliario -- the law is in place but not many have started up yet.
Real Estate Investment Trusts in Mexico or Fideicomisos de Infraestructura y Bienes Raíces or FIBRAs -- the first Mexican REIT launched in March 2011.
Real Estate Investment Trusts in Chile or Fondo de Inversion Inmobiliario or FII -- they are required to pay out only 30% of net profits to shareholders.
Real Estate Investment Trusts in Nigeria -- there are currently two REITs listed on Nigerian stock exchange.
Real Estate Investment Trusts in Peru -- very hard to find out about.
Real Estate Investment Trusts in Pakistan -- several REITs there are on the verge of getting started.
Real Estate Investment Trusts in Puerto Rico -- despite any an early legal start, there are not many there yet.
Real Estate Investment Trusts in Spain -- are called Sociedades Anónimas Cotizadas de Inversión en el Mercado Inmobiliario or SOCIMIs.
Real Estate Investment Trusts in Thailand -- are currently being delayed by red tape.
Real Estate Investment Trusts in South Africa -- don't really exist, but there are Property Unit Trusts or PUTs.
Real Estate Investment Trusts in Bahrain -- the first one is Shariah compliant, and still private, not publicly listed.
Real Estate Investment Trusts in Israel -- lagging behind.
Real Estate Investment Trusts in South Korean -- doing well despite having to pay corporate income taxes.
Real Estate Investment Trusts in Kuwait -- getting started with one private one, so far.
Real Estate Investment Trusts in Malaysia -- REIT leader in Asia.
Real Estate Investment Trusts in Taiwan -- REITs in Taiwan are shrinking in number.
Real Estate Investment Trusts in Turkey -- also known in Turkish as Gayrimenkul Yatirim Ortakligi or GYO.
Real Estate Investment Trusts in Jamaica -- only one REIT in the Caribbean area.
Real Estate Investment Trusts in Kazakhstan -- only one REIT in the ex-USSR area.
Real Estate Investment Trusts in Nigeria -- so far, they are concentrated on renting and mortgaging residences.
Real Estate Investment Trusts in Ghana -- there's been only one, since 1995.
The idea of Real Estate Investment Trusts is spreading quickly around the world. REITs are proving very popular with investors of all nationalities.
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