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Real Estate Investment Trust

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Susan Klimaszewski

Thread Starter
Junior Member
Joined
Jan 9, 2003
Professional Status
Licensed Appraiser
State
Texas
Can someone help me out with some information? I have an active comparable that transferred from a private owner by Trustee/Substitution Trustee Deed on 04/03/2007 to a company who lists their business as a privately incorporated entity who has as their Line of Business: Real Estate Investment Trust. The comparable was listed for sale on the MLS appx 5 months after this transfer and the seller is listed as the company.

The realtor says that this company is not a REO or RELO company but would give me no other information. The company lists 1 employee only and the president of the company is not the name on the transfer deed.

I Googled 'Real Estate Investment Trust' and found
A Real Estate Investment Trust or REIT (pronounced /ˈriːt/) is a tax designation for a corporation investing in real estate that reduces or eliminates corporate income taxes. In return, REITs are required to distribute 90% of their income, which may be taxable in the hands of the investors. The REIT structure was designed to provide a similar structure for investment in real estate as mutual funds provide for investment in stocks.

So....... pardon my ignorance, but is this active listing one that can be used? Anyone who can explain it to me in layman's terms?
 

Walter Kirk

Senior Member
Joined
Jun 24, 2003
Professional Status
Licensed Appraiser
State
New Jersey
Yes you can use an active listing as a comparable. Listings are the best way to illustrate the upper end of the value range. Of course lenders will not generally accept listings for the first three comps.

REIT's are investment vehicles. In most cases they buy large complexes and have management staffs. A REIT with only one employee which buys and lists SFR's is out of the ordinary.
 

Susan Klimaszewski

Thread Starter
Junior Member
Joined
Jan 9, 2003
Professional Status
Licensed Appraiser
State
Texas
Mr. Kirk,

Thanks,

It's a FMNA REO so it needs active comparables. I'm just really at a loss over the REIT. What you just said is what I am finding with my searches and I'm just getting more confused. (Not too hard to do on a Monday!)
 

Walter Kirk

Senior Member
Joined
Jun 24, 2003
Professional Status
Licensed Appraiser
State
New Jersey
It occured to me that this REIT could be a sophisticated flipper. How much did the REIT pay for the property? Has the property had any recent improvements? Camn you find any other properties owned or sold by this REIT?
 

Susan Klimaszewski

Thread Starter
Junior Member
Joined
Jan 9, 2003
Professional Status
Licensed Appraiser
State
Texas
Non-disclosure state so if money changed hands in the Trustee/Substitution I wouldn't know it. Sales show as Warranty Deed Transfers.

I searched the county appraisal district and the company is not shown as the owner of any other properties, only this 1 single family house.

Krissleigh. Inc.

I may be confusing things.

The comparable was transferred by Warranty Deed (No sale or listing shown in MLS) on 10/31/2005 from the builder to what appears to be a husband and wife. It was then transferred by Substitute Trustee Deed on 04/03/2007 with the husband/wife as the grantor and Krissleigh, Inc as the grantee.

It is now an active comparable in the MLS listed for sale by Krissleigh. INC
 
Last edited:

Mike Boyd

Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
I'm just guessing but I think a husband and wife transferred this property into their own REIT so it can be considered as an investment and avoid taxation when it sells. The other individual is probably a manager of individually owned REITS.

Therefore, it can be used as a listing comps with no prior market sales.

(If my guess is correct.)
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
You can set up your own REIT. It's just an investment vehicle for real estate as opposed to a 401K, etc.
 

Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
You can set up your own REIT. It's just an investment vehicle for real estate as opposed to a 401K, etc.

According to the link just above your post, its not so simple.


3. How Does a Company Qualify as a REIT?
In order for a company to qualify as a REIT, it must comply with certain provisions within the Internal Revenue Code. As required by the Tax Code, a REIT must:
  • Be an entity that is taxable as a corporation
  • Be managed by a board of directors or trustees
  • Have shares that are fully transferable
  • Have a minimum of 100 shareholders
  • Have no more than 50 percent of its shares held by five or fewer individuals during the last half of the taxable year
  • Invest at least 75 percent of its total assets in real estate assets
  • Derive at least 75 percent of its gross income from rents from real estate property or interest on mortgages on real property
  • Have no more than 20 percent of its assets consist of stocks in taxable REIT subsidiaries
  • Pay annually at least 90 percent of its taxable income in the form of shareholder dividends
 

Marcia Langley

Senior Member
Joined
Aug 26, 2005
Professional Status
Certified Residential Appraiser
State
Missouri
Susan,

From your point of view as needing it for a comparative listing, I'd think that would be fine.

Of course you'd need to report the prior transfers and state just the facts as you know them in your analysis. If you know for sure it's a REIT, report that, if you were told it's a REIT, report that.

You would not be obligated to draw conclusions from that transfer unless you discovered something pertinent to value.
 
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