Pittsburgh Real Estate Investment Trusts Attorney

Man forming real estate investment trust

Are you building a real estate portfolio in Pennsylvania? A real estate investment trust (REIT) may be a strategic option for protecting and growing your investments. In an REIT, a company owns and manages real estate properties with the goal of generating income. 

As a full-service law firm, Jones, Gregg, Creehan & Gerace LLP is a trusted authority in all the intricacies of real estate investment trusts. Our extensive knowledge and experience are instrumental in helping clients structure and implement REITs. We understand that REITs are complex and require advisors with tax, corporate, and real estate experience, providing you with the confidence and reassurance you need in your investment journey. 

What Is a Real Estate Investment Trust?

A real estate investment trust (REIT) works similarly to a publicly traded company. However, REITs are required to distribute at least 90 percent of their taxable income to their shareholders. Through a REIT, investors can own and manage several types of real estate properties, including office buildings, residential apartments, shopping malls, hotels, resorts, and more. They allow investors to invest in real estate portfolios without actually owning any physical property, providing an appealing way to invest in real estate in Pittsburgh passively. 

There are two main types of REITs: mortgage REITs and equity REITs. Equity REITs own and invest in physical properties, while mortgage REITs own mortgages on physical properties. Equity REITs allow investors to generate income through property appreciation and rent, while mortgage REITs generate income through the interest payments on the underlying mortgages. At Jones, Gregg, Creehan & Gerace LLP, we use our experience to maximize the benefits of REITs for our clients, providing them with confidence and reassurance. 

The Benefits of Utilizing a Real Estate Investment Trust

Real estate investment trusts are a popular way for many investors, including institutional and individual investors, to potentially earn high returns. There are several benefits that come with investing in a REIT. They have a low barrier to entry, allowing any investor, small or large, to purchase at least one share of a publicly traded REIT. This provides an opportunity for investors, especially those with limited capital to invest, to see significant returns on their investments. 

Diversification of Your Portfolio

Investing in an REIT ensures a diversified portfolio of real estate assets, a benefit that may not be available through traditional stock market investments like ETFs and mutual funds. This diversification allows investors to move into real estate assets, providing exposure to a different type of investment not typically found in a traditional portfolio.

Tax Benefits

According to the IRS, REITs must pay at least 90 percent of their profits and income in the form of dividends. This structure, along with the 199A qualified business income deduction, provides significant tax benefits to investors. As long as the REIT complies with IRS rules, they can claim special tax treatment because they aren’t taxed at the entity level. This tax-savvy approach avoids double taxation and drives higher investor returns, resulting in a potentially prudent and savvy investment strategy. 

The 2017 Tax Cuts and Jobs Act also created the 199A-qualified business income deduction. Non-corporate taxpayers can deduct up to 20 percent of eligible qualified publicly traded partnership income and qualified REIT. Investors are not subjected to wage restrictions or caps on the total deduction amount. Taxpayers aren’t required to itemize their tax deductions to receive the 20 percent QBI deduction. 

The Risks of Utilizing REITs

There are some risks associated with investing in REITs, and investors should carefully weigh the risks against the benefits with the help of an experienced real estate attorney. REITs allow investors to sell their shares on the market. Nonetheless, these investments are less liquid than other types of investments, such as stocks or bonds. 

Finding buyers for the property may take a lot of work. Consequently, liquidity is only available through the REIT’s repurchase offers. There is no guarantee that shareholders will be able to see their shares if they want to sell them in the quarterly repurchase offers, making it difficult to convert stocks into cash when needed.

Real Estate Market Risks

Real estate investment trusts are subject to market fluctuations. Investors may receive less money in disbursements than when they originally paid for them if they sell shares in the public exchange. Changes in interest rates, recession, natural disasters, and fluctuations in the residential and commercial real estate markets can affect the entire financial market, making it difficult to eliminate downturns through diversification. 

Who Will Benefit From a Real Estate Investment Trust?

The REIT structure provides significant tax benefits, particularly for high-net-worth individuals, due to the QBI deduction. Non-REIT investment structures may impose income limitations not found in REITs. Although the QBI deduction is set to end at the end of 2025, a bill has been introduced to extend the deduction permanently. 

REITs aren’t required to pay corporate income taxes because shareholders receive their earnings as dividends, allowing investors in the U.S. to invest in diversified properties without exposing themselves to needing multi-state tax filings. Foreign and tax-exempt investors can also benefit from REITs.

Contact a Real Estate Investment Trust Attorney in Pittsburgh

Before investing in real estate investment trusts, investors should take time to understand the risks and rewards of investing in this option. Jones, Gregg, Creehan & Gerace LLP have extensive experience creating and implementing REITs. We represent clients in Pittsburgh and throughout Pennsylvania. Don’t hesitate to contact Jones, Gregg, Creehan & Gerace LLP to schedule a case evaluation and learn more about how we can advocate for your legal and financial best interests.