There are many ways to invest in commercial real estate, and one method that has become more popular is the real estate investment trust. An REIT can be used to own, operate, and finance real estate that generates income. There are some advantages to this setup, but you may want to talk to our New York commercial litigation & real estate lawyers to learn more about REITs before you get serious about investing.
What is a Real Estate Investment Trust?
A real estate investment trust acts much like a mutual fund. Instead of investing in stocks, you are investing in buildings. These buildings create income and that income is spread to investors, much like dividends would be distributed to stockholders. So you can collect money from a real estate investment without having to purchase or manage a property on your own.
There are also specific rules that every REIT has to meet in order to be in compliance with the Internal Revenue Code. For example, one needs to invest at least 75% of its total assets in real estate, cash, or U.S. Treasuries. An REIT also has to be taxable as a corporation. If you want to set up your own real estate investment trust, our lawyers may be able to assist you.
What Can a Real Estate Investment Trust Invest In?
A real estate investment trust does not just invest in commercial real estate, like offices. Though it can do that, it can also invest in properties like hotels, apartment buildings, medical facilities, and warehouses. A REIT can even invest in cell towers and other infrastructure.
Some REITs can be more specialized though. If you are looking specifically for a real estate investment trust that focuses on commercial properties, you can probably find one by talking to a broker.
Why Use a REIT?
When you use an REIT, you get to pool your money together with other investors. As we mentioned earlier, this means that you can receive income from investment properties without needing to put up all the capital on your own.
An REIT is also publicly traded, like a stock. This makes it more of a liquid asset than an actual real estate investment would be. If you need access to some quick cash or you just want to get out of an investment, selling is easier because you do not have to offload an entire property on someone.
Are There Any Potential Drawbacks to These Investments?
Like any other type of investment, you could end up losing money when you invest in a REIT due to changes in the economy or real estate market. The growth also tends to be on the lower side for investments, so a real estate investment trust is hardly a get rich quick scheme.
Contact Our Law Firm Today
If you have questions about commercial real estate or run into any issues that need to be litigated, we are ready to help. Contact David A. Gallo & Associates LLP and schedule a consultation with our team today.
