Posted by Adam on August 13, 2003 at 09:22:29:
A REIT is nothing more then a tax election for a corporation or trust. It allows the entity to only be taxed at the dividend level (no double taxation) as long as all REIT criteria are met. Criteria includes some of the following:
- Must be a corporation or Trust
- Must have a minimum of 100 shareholders
- five shareholders cannot own 50% or more stock (50% rule)
- REIT must invest at least 75% of its assets in real property
- At least 90% of taxable income (profit) must be disbursised to shareholders (dividends)
The cost to form a REIT can range all over the place depending on how complicated it is and who is doing the work. Basically it is a matter of forming a corporation or trust with the proper articles of incorporation, meeting the REIT criteria and electing for the conversion with the IRS (federal).
REITs can be very complicated and there are a lot of stratagies available. I would do a lot of reading before you invest the money into this kind of venture… Go to WWW.NAREIT.COM for resources.