MANAGING PROPERTY BUSINESSES

Managing Property Businesses



Managing Property Businesses

Real estate investment trust (REIT) is a corporation or trust that pools the capital of many investors to buy income property (equity REIT) and / or mortgage loans (mortgage REIT). Equity REIT owns and manages property, unlike a mortgage REIT that purchases mortgages and can also borrow money from banks to lend again to higher interest rates. Some REITs also provide credit or develop properties.

Why would I want to invest £ 10,000?

I would like to invest £ 10,000 in real estate investment trust (REIT) corporation, because REIT shares publicly traded on stock exchanges, and as such present opportunities for individual investors to hold a variety of property assets. REITs are eligible for tax incentives in corporate earnings, and in return, REITs must distribute 90% of their income as dividends to its shareholders every quarter. This may be taxable in the hands of investors. REIT structure was designed to provide a similar structure for investment in real estate as mutual funds provide for investment in stocks. To continue to grow and acquire new properties to REITs must issue stock or raise debt capital markets. The typical REIT IPO raises billions of dollars post(Oyedele, 2006).

Advantages and Disadvantages of UK REITS

Advantages

1. This allows the available indirect investments in real estate. Participants can invest in a professionally managed portfolio of real estate, which is held in tax transparent structures. This serves to open a real estate investment for small investors, who would not otherwise have this opportunity for investment;

2. This gives participants an opportunity to expand their investment portfolio and risk diversification(Onibokun, 2000)

3. As a general rule, tax transparent. There is only one level of taxation. REIT does not pay income taxes thereby maximizing shareholders' dividends, you pay tax on dividends and profits when they sell their shares. Typically, U.S. REIT will pay off at least 90 percent of its profits to its shareholders, and in many cases even more, with some REITs distributing all their profits to their shareholders. REITs may also be used to eliminate some of the tax and other complex experienced institutional investors such as pension funds and foreign inventors, if they invest more directly in real estate;

4. It provides ease of liquidation of assets into cash in the first place because they are traded on the Stock Exchange;

5. It offers a historically low volatility. REITs are generally stable, and therefore offer an attractive return for investors; (Nubi, 2002)

Disadvantages

1. REITs invest in real estate specifically to generate revenue and give the profits to investors as dividends. In fact, REITs must distribute at least 90% of any profits to qualify for preferential tax treatment. Investors can buy, sell and trade shares of REITs as if it is a normal stock. However, as REIT real estate transactions, not widgets, they differ in how they finance the expansion and a measure of profitability.

2. Normal investor criteria, as P / E ratio cannot be applied to the REIT the same as in other equity ...