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Once you have a plan for what you want to do, the following steps will take you from idea to REIT status. Form a taxable entity. Draft a Private Placement Memorandum (PPM) Find investors. Convert your management company into a REIT. Maintain compliance.
Most REITs have a straightforward business model: The REIT leases space and collects rents on the properties, then distributes that income as dividends to shareholders. Mortgage REITs dont own real estate, but finance real estate, instead. These REITs earn income from the interest on their investments.
A company may qualify as a REIT, under federal law, if a majority of its assets and income are connected to investing in real estate, and if 90 percent if its taxable income is returned to shareholders through dividends. REITs must have boards of directors, a minimum of 100 shareholders after its first year as REIT.
6 Essential Elements of a Contract Offer. Acceptance. Awareness. Consideration. Capacity. Legality.
Non-traded REITs can be expensive: The cost for initial investment in a non-traded REIT may be $25,000 or more and may be limited to accredited investors. Non-traded REITs also may have higher fees than publicly traded REITs.
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A REIT can be a trust, a state law corporation, an LLC, or a partnership (or other type of eligible state law entity), so long as it is taxable as a C corporation.
The Five Elements of a Contract Offer. Acceptance. Consideration. Capacity. Lawful Purpose.
What are the compliance rules for becoming a REIT? In order to qualify as a REIT, a company must make a REIT election by filing an income tax return on Form 1120-REIT. Since this form is not due until March, the REIT does not make its election until after the end of its first year (or part-year) as a REIT.
Private REITs are real estate funds or companies that are exempt from SEC registration and whose shares do not trade on national stock exchanges. Private REITs generally can be sold only to institutional investors.
To qualify as a REIT a company must: Invest at least 75% of its total assets in real estate. Derive at least 75% of its gross income from rents from real property, interest on mortgages financing real property or from sales of real estate.

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