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Simple English definitions for legal terms
real estate investment trust
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A quick definition of real estate investment trust:
A real estate investment trust, also known as a REIT, is a group of people who pool their money together to buy real estate. This can be either a percentage of the property itself or a loan secured by a mortgage or deed of trust on the property. The money is usually used to develop the property and build upon it, and when the property is sold, any profits are divided among the investors.
A more thorough explanation:
A Real Estate Investment Trust (REIT) is an organization that invests in real estate. It finds investors and buys properties, then gives each investor a share of the property or an interest in a loan secured by a mortgage or deed of trust on the property. The loan is usually used to develop the property and build upon it, and then there is a division of profits upon sale-if there is a profit.
- ABC REIT buys a shopping mall and gives investors a percentage interest in the mall. The investors receive a share of the rental income and a share of the profits when the mall is sold.
- XYZ REIT invests in a hotel and gives investors an interest in a loan secured by a mortgage on the hotel. The investors receive interest payments on the loan and a share of the profits when the hotel is sold.
These examples illustrate how a REIT works. Investors pool their money together to buy real estate, and then they receive a share of the income and profits from that real estate. This allows investors to invest in real estate without having to buy and manage properties themselves.