Real estate investment trusts (“REITs”) allow individuals to invest in large-scale, income-producing real estate. A REIT is a company that owns and typically operates income-producing real estate or related assets. These may include office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans.
Unlike other real estate companies, a REIT does not develop real estate properties to resell them. Instead, a REIT buys and develops properties primarily to operate them as part of its own investment portfolio.
In Michigan, Real Estate Investment Trusts (REITs) are governed by both state statutes and federal law. REITs are designed to provide a way for individual investors to earn a share of the income produced through commercial real estate ownership without actually having to buy, manage, or finance any properties themselves. To qualify as a REIT under federal law, a company must comply with certain Internal Revenue Code requirements. These include primarily investing in real estate, distributing at least 90% of taxable income to shareholders annually in the form of dividends, and meeting certain organizational and operational tests. Michigan state law also provides regulations regarding the formation, operation, and taxation of REITs. These entities are typically structured as corporations or trusts and must adhere to the Michigan Business Corporation Act or the Michigan Statutory Trust Act, respectively. REITs in Michigan are subject to state taxation, and they must comply with securities laws if their shares are publicly traded. It's important for investors to consult with an attorney to understand the specific legal and tax implications of investing in REITs in Michigan.