What is a REIT?
A REAL estate investment trust – REIT for short – is a relatively new concept in Ireland, but they are already becoming hugely important both socially and economically.
Broadly, a REIT is a stock market company set up to invest in property. That means money is raised from lots of shareholders to buy or build properties, or alternatively a portfolio is put together that investors can buy into. The idea is that as the property market became more large scale, small investors can pool together to fund the kind of big deals that are increasingly the norm.
As it is cheaper to buy shares than a house, it was seen by some policy makers as a less volatile way of getting people to invest in buy-to-let property.
These policy makers believed it was preferable to the old model of small scale investors buying piecemeal for second income or retirement investments.
REITs get very special tax treatment – they’re not liable to corporate tax on income and capital gains arising from its property rental business.
However, they must distribute at least 85pc of rental income, net of costs, to shareholders every year. The idea is that the shareholders are then taxed on the income.
In reality many investors are abroad. REITS have been in the US since the 1960s, but only came in here in 2013.
A time when the Government was desperate to get money into the bust property market, and Irish property veterans saw bargains but lacked the cash to buy them.
REITS, including IRES, are now a big part of the property market. In theory anyone can buy their shares and therefore share when they make a profit.