Level 2 - Types of Ownership

Question 1

Three Forms of Ownership:

Answer 1

1. Ownership in severalty (individual or sole ownership, also known as tenancy in severalty)
2. Co-ownership, sometimes called concurrent ownership
3. Trusts

Question 2

Ownership in severalty or
Estate in Severalty or
Tenancy in severalty

Answer 2

1. individual or sole ownership,
2. only one owner, whether that is a person, corporation, or other legal entity.
3. Yeuta Owner (person) as LLC, cooperation, or other legal entity.

Note: Corporations Are People Too
Holding an estate in severalty isn’t just for people — it’s for corporations too!
Even though a corporation may have several different owners (or shareholders), the law views corporations as single, legal entities.
Property held by a corporation is ownership in severalty,

Question 3

what is Co-ownership what are 3 types?

Answer 3

Two or more owners, sometimes called concurrent ownership

The 3 types are:

1. Tenancy in common
2. Joint tenancy
3. Tenancy by the entirety

Question 4

But First, Some Co-Ownership Concepts You Need to Know Before you can understand the differences between co-ownership types, you need to understand these 1st concepts:

Undivided interest means:

Answer 4

a type of interest that gives each co-owner the right of possession of the whole property, not simply a portion of it

Question 5

But First, Some Co-Ownership Concepts You Need to Know Before you can understand the differences between co-ownership types, you need to understand these 2nd concepts:

Right of survivorship means:

Answer 5

Owner-sathi marema baki bacheka owner-sathi haruma badine

the statutory(permitted) principle of survivorship tenancy(possession of land or property as a tenant) which means that when one co-owner dies, their ownership interest reverts to the surviving co-owner(s)

Without the right of survivorship, a co-owner’s interest goes to their heirs if they die, instead of the remaining co-owner(s).

Question 6

unities of co-ownership

These 3 forms of co-ownership (Tenancy in common, Joint Tenancy & Tenancy by the entirety) differ in both the way they are created and the way they are transferred. To understand how, exactly, those differences manifest, you first need to understand a group of conditions called the unities of co-ownership.

Answer 6

The Four Unities(condition):

1. Unity of possession
2. Unity of interest
3. Unity of time
4. Unity of title

Question 7

1. Unity of Possession:
2. Unity of Interest:
3. Unity of Time:
4. Unity of Title:

To remember use acronym PITT. PITTsburgh

Answer 7

1. Unity of Possession:

While this unity describes the same rights of possession as “undivided interest,” which means a type of interest that gives each co-owner the right of possession of the whole property, not simply a portion of it

_____________________________________________

2. Unity of Interest:

The unity of interest provides that each co-owner holds an equal share in the property.

It’s important to realize that the unity of interest (which gives each co-owner an equal share or ownership of the property) and the unity of possession (which gives each co-owner the right of the enjoyment of the whole of the property) can co-exist.

meaning this 2 condition can exist together.

Virginia has a specific interpretation of the unity of interest, which is that one joint tenant can’t be a tenant for life, while another is a tenant for years.

_______________________________________________

3. Unity of time:

The unity of time speaks to the requirement of co-owners to acquire their ownership or interests at the same time.

Consequently, any form of co-ownership featuring this unity or condition stipulates that no additional owners can be brought into the original agreement at a later date. If that is desired, a completely new contract would need to be created.

________________________________________________

4. Unity Of Title:

Similar to unity of time, unity of title requires co-owners to acquire their property from the same transaction. Co-owners must also hold title under the same document (such as a deed or a will).

Adherence to this unity will naturally cause adherence to unity of time, so these unities co-exist.

_______________________________________________

The Mysterious Fifth Unity

some of us in the biz recognize unity of person as the fifth unity. This unity refers to co-owners that are, for legal purposes relative to ownership of the property, a single indivisible unit.

legal purpose relative( as married couple) Some states view married couples as a single legal unit. This comes into play with tenancy by the entirety, a type of ownership reserved for marrieds only (and only exists in certain states).

Question 8

Question A
Co-Ownership Type 1: Tenancy in Common

Question B
What’s Special About Tenancy in Common?

Answer 8

Answer A
is the most common form of co-ownership for unmarried co-owners, but that’s not why it’s called that… it’s just a happy coincidence.

Answer B
Tenants (unmarried) in common have:

1. Undivided interest in the property
2. The right of inheritance, not survivorship
3. The ability to own unequal shares of the property

Each co-owner can sell, mortgage, lease, or transfer their ownership share without the permission of the others, so long as the transfer doesn’t interfere with the ownership rights of the others.
________________________________________________

1. Undivided interest in the property

Tenancy in common requires only one unity among four unities: The 1st unity: the unity of possession. Also called undivided interest, it means that each co-owner has the right to use the entire property, regardless of what proportion of the property they own.
______________________________________________

2. The right of inheritance, not survivorship

The right of inheritance means that if one co-owner dies, their share goes to their heirs, not the rest of the co-owners.
______________________________________________

3. Unequal Shares

Tenancy in common does not require the unity of interest: Instead, co-owners can own unequal shares. An example would be 80/20 or 50/25/25, though they all have an equal right to use the property. Remember, that’s undivided interest.

Question 9

Co-Ownership Type 2: Joint Tenancy

Answer 9

Joint tenancy is the second type of co-ownership.

1. Requires all four unities
2. In common law, comes with the right of survivorship (in Virginia, for joint tenancy to come with the right of survivorship, that has to be spelled out in the deed)

Four Unities
Joint tenancy requires the unities of possession, time, title, and interest. That means co-owners ALWAYS hold equal shares (unity of interest). They have undivided interest in the property (unity of possession). They purchased the property all together at the same time (unity of time) with the same title document (unity of title).

Right of Survivorship
Joint tenancy generally includes the right of survivorship rather than inheritance. If one joint tenant dies, their share of the property is absorbed by the remaining joint tenants, instead of passing to their heirs.

**IMPORTANT**
Virginia has abolished automatic survivorship. To be joint tenants with survivorship in our great state, that must be written in the deed.

Only humans can be joint tenants. Corporations (and robots) can never die, so they can’t own property as joint tenants.
___________________________________________

More information:
Joint Tenancy: In Deed!

The only way joint tenancy ownership can be transferred is by deed.

In the event of the death of a co-owner with the right of survivorship, the original deed sets in motion the equal and simultaneous survivorship rights of the surviving co-owners. They each receive an equal share of their dearly departed co-owner’s interest.

Transferring Ownership While Still Alive

However, if a still-living-and-breathing co-owner were to transfer their ownership by way of deed, something else altogether happens.

When a joint tenant (co-owner) transfers their ownership by deed, the new co-owner has ownership, but in a different form than that of the original co-owners. The original co-owners remain in their joint tenancy arrangement; the new guy has ownership of their share as a tenant in common relative to the rest of the gang.

Question 10

Compare and Contrast: Joint Tenancy vs. Tenancy in Common

Answer 10

Right off the bat, you’ll notice that joint tenancy differs from tenancy in common in two ways:

1. The interests of the parties are ALWAYS equal. (same)
2. It includes the right of survivorship. (different)

Question 11

The Right of Survivorship as a “Lazy Will”

Definition only not a question

Answer 11

The right of survivorship has sometimes been called a “poor man’s will” or “lazy will,” because the property will be deeded directly to the person inheriting it without going to probate, despite what it says in the decedent’s actual will. (Probate is the expensive and complicated process of having a judge execute someone’s will.)

However, you probably still want to invest in a will, since joint tenancy only affects the property in question, and not any of the rest of your estate.

Question 12

Joint Tenancy Is Permanent(ish)

Answer 12

Additionally, unlike with a will where you can change your heir based on which of your grandchildren is currently your favorite, you can’t change who is in a joint tenancy agreement without dissolving the agreement (which is called partition) and reforming it with other co-owners.

You Still Gotta Pay Taxes
Sometimes people assume that, because a property held in joint tenancy bypasses probate when a co-owner dies, it also bypasses estate taxes. I think we can all agree this sounds like wishful thinking. The IRS is going to collect those taxes, whatever kind of tenancy you have.

On the upside, estate taxes only kick in on estates north of $5 million, so if you have that problem, well, congrats.

Question 13

What is Partition and how it works?

Answer 13

a party does not have to die to get out of either of the two types of co-ownership we’ve discussed thus far (tenancy in common and joint tenancy).

it’s a parties can get out of these co-ownership situations by acting on their right of partition.

Partition is the ability to divide certain forms of co-ownership into separate interests or to convey a partial interest in a co-owned property unilaterally.
—————————————————————————-
Partition: Voluntary or Not

Partition can be done pleasantly, or at least voluntarily if all parties agree, by dividing the property so each party owns a portion in severalty. If the parties can’t come to an agreement on how to proceed, one co-owner can always sue the others to legally dissolve the co-ownership and either divide the property itself, or divide the gains from the sale from the property. This is called a partition suit.

Question 14

Co-Ownership Type 3: Tenancy by the Entirety

Answer 14

Tenancy by the entirety is a form of co-ownership for married couples only, where legal spouses each hold an equal and undivided interest in the property which cannot be conveyed or encumbered without consent of the other. ​Just like joint tenancy, it comes with the right of survivorship.
Because tenancy by the entirety is a co-ownership between only two people, if one of the co-owners dies, the surviving spouse would own the property in severalty.

There are 26 states that recognize tenancy by the entirety. Virginia recognizes tenancy by the entirety for married couples.
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Community Property States
There are nine states that are community property states. Community property states operate on the idea that all property acquired during a marriage is acquired due to the shared effort of both partners. Therefore, it’s equally owned by the two of them.

In community property states, any property that is acquired during a marriage is considered to be owned equally by both spouses, and cannot be sold without the signatures of both spouses.

This applies to both real property (like houses) and personal property (like washing machines).
*****************
Everyone Else
In states that recognize neither tenancy by the entirety nor community property, married co-tenants choose to be tenants in common or joint tenants when they take title, just like any other co-tenants.

They specify on their deed how they want to hold the property.
******CONCLUSION*********
so out of 50 states:
26 states including Virginia: tenancy by the entirety (for married couples)
9 states: Community Property States
Other Remaining,
15 state: Let spouse choose whether tenancy by the entirety or Community Property States

Question 15

Community Property States

Answer 15

There are nine states that are community property states. Community property states operate on the idea that all property acquired during a marriage is acquired due to the shared effort of both partners. Therefore, it’s equally owned by the two of them.

In community property states, any property that is acquired during a marriage is considered to be owned equally by both spouses, and cannot be sold without the signatures of both spouses.

This applies to both real property (like houses) and personal property (like washing machines).

Question 16

Tenancy by the Entirety: Taking the Fifth

Answer 16

Tenancy by the Entirety: Taking the Fifth
Remember the mysterious fifth unity we talked about earlier? The fifth unity is the unity of person and states that co-owners are, for legal purposes relative to ownership of the property, a single, indivisible unit. This is the main distinguishing point between tenancy by the entirety and community property: Property held in tenancy by the entirety is held not half and half by each spouse, but by a third entity, a sort of legal fictional person.

So, in addition to the four unities required for joint tenancy (possession, interest, time, and title), tenancy by the entirety also requires the unity of person. That’s a grand total of five, count ‘em, five unities!

Question 17

How to Terminate a Tenancy by the Entirety

Answer 17

There are three ways to end a tenancy by the entirety:

1. By death: To be avoided, if possible. When this does occur, it results in tenancy in severalty.
2. By agreement: If the spouses both agree to terminate this ownership type, they can each sign a new deed to that effect.
3. By divorce: When a couple divorces, their tenancy by the entirety automatically becomes a tenancy in common, unless a judge rules otherwise.

Question 18

Chapter 2:

Answer 18

Ownership as a Business

As a real estate agent, there are also huge % of house sold as a investment properties: purchased as whether that’s a sole proprietor, part of a partnership, or a corporation.

Question 19

Key Terms :

Answer 19

joint venture

sole proprietorship

limited partnership

general partnership

syndication

Real Estate Investment Trust (REIT)

Question 20

Business Organization Forms

Answer 20

Sole proprietorships
Partnerships (general and limited)
Corporations (C and S corps)
Limited liability companies and limited liability partnerships

We’re also going to be talking about the ways that investors can own real estate as a group. Namely:

Syndicates
Joint ventures
REITs

Question 21

Sole Proprietorships

Answer 21

A sole proprietorship is a business organization form assumed by an individual (or legal spouses as a single legal entity). As a sole proprietorship, a business operates as an extension of the owner — the business is INCAPABLE of owning real estate on its own.

For this reason, the owner is personally liable for the profits, debts, and obligations of the business. Consequently, the owner’s personal assets are at risk in the event of business failure or debt.

This type of organization can operate under the name of the owner or another name, just so long as it is properly registered with the state.

DO NOT BE CONFUSE, THIS IS NOT LLC

Question 22

What protections do a sole proprietor’s personal assets have from their business’s losses and liabilities?

Answer 22

None, Sole proprietor are personally liable for their businesses

Question 23

Partnerships

Answer 23

Partnerships are businesses that have a co-ownership structure. In a partnership, two or more people enter into a for-profit enterprise and share the risks and rewards of the business.

Question 24

Uniform Partnership Act

Answer 24

In many states, including Virginia, partnerships are regulated by the Uniform Partnership Act (later, the Revised Uniform Partnership Act), a law created by the National Conference of Commissioners on Uniform State Laws. This body aims to create uniform legislation that states can choose to adopt (or change, then adopt).

Question 25

Owning Property as a Partnership

Answer 25

In other words, like a corporation, it creates a separate “partnership” entity that can sue, be sued, and hold property separate from a partner’s individual property (and protect that property from a partner’s creditors).

An individual partner’s property and the partnership’s property are separate things. RUPA also gave limited liability protections to general partners in limited liability partnerships (more about what that means in a moment).

Question 26

Partnerships: How Property Is Held

Answer 26

Partnerships can hold property in a few ways:

Tenants in partnership: This grants each member of the partnership equal and undivided interest in the property. The property is purchased and owned by the partnership, as a separate entity.

Individual partners: This establishes either tenancy in common or joint tenancy. Partners can convey their share of the property, but only with the approval of all partnership members. In this setup, the property is held by the partners themselves, not by the partnership entity.

Question 27

Tenants in partnership:

Answer 27

This grants each member of the partnership equal and undivided interest in the property. The property is purchased and owned by the partnership, as a separate entity.

Question 28

Individual partners:

Answer 28

This establishes either tenancy in common or joint tenancy. Partners can convey their share of the property, but only with the approval of all partnership members. In this setup, the property is held by the partners themselves, not by the partnership entity.

Question 29

Which of these is NOT a way property can be held by partnerships?

Answer 29

1. joint tenancy
2. tenants in common
3. tenancy by the entirety
4. tenants in partnership

The Answer is (#3): tenancy by the entirety

Question 30

General vs. Limited Partnerships

Answer 30

Partnerships come in two forms:

General
Limited
The partnership form that members choose will dictate the degree of control and liability each member of the partnership carries. Often, a partnership will be made up of both general AND limited partners.

Question 31

General Partnerships

Answer 31

With general partnerships, each member equally assumes unlimited personal responsibility for the financial liabilities and obligations of the business. Often, the partnership is created because the real estate investment requires more time, talent, or resources than one person can provide on their own. That said, general partners are “hands on” partners, actively involved in day-to-day operations.

If any member of the business organization dies, goes bankrupt, or chooses to withdraw, the partnership will need to either be dissolved or reorganized.

Question 32

Limited Partnerships

Answer 32

Limited Partnerships
Limited partnerships are business organizations comprised of at least one general partner and one limited partner. Limited partners are limited in terms of their degree of control, participation, AND liability, basically operating as investors. Unlike general partners, they are only liable to the extent of their investment.

A limited partnership can survive the death or departure of either a general or limited partner. This is because of contingency plans set out in the partnership documents.

Remember how I said that a partnership could contain both limited AND general partners? Of course you do. Well, I want to add that it wouldn’t be made up of only limited partners. Why? Good question, Desh. This is because limited partners are passive members, and someone has to run the show (or business).

Question 33

What is the main difference between general and limited partnerships?

Answer 33

What is the main difference between general and limited partnerships?

In limited partnerships, some partners have less personal liability.

Question 34

Given that Zack is a limited partner and Zoe is a general partner, what kind of partnership are they most likely to have?

Answer 34

A limited partnership usually has at least one limited and one general partner.

Question 35

Corporations

Answer 35

Corporations are legal entities that can be public, private, for profit, or nonprofit. They are created in accordance with state law (by way of a charter or certificate of corporation) and exist only as a matter of law.

A corporation is a company or a group of people who are considered a single entity under the law. Corporations are people, too — from a purely legal standpoint, that is! That’s right, a corporation is considered a legal person, separate from the individual stockholders in the corporation.

And because a corporation is legally treated the same as a single person, the corporate ownership of real estate is ownership in severalty. Individual stockholders are NOT liable for the corporation’s debts.

Question 36

Who’s Who in a Corporation

Answer 36

Here’s a quick look at the major players/groups you’ll find within a corporation:

The owners: Shareholders (or stockholders) own the corporation in stocks.

The board: The owners of the company (shareholders) are represented by the board of directors, who are elected by shareholders.

The managers: These corporate officers run the day-to-day operations of a corporation.

Question 37

Which of the following statements about a corporation is TRUE?

Answer 37

From a legal standpoint, a corporation is considered to be a person.

Question 38

Corporations: Two Types

Answer 38

C Corporations: A C corporation is the most common form that a corporation can take. It can be any size and can be multinational in its composition. C corps are allowed to issue several different classes of stock. This structure is subject to double taxation: The corporation itself pays income tax AND shareholders are taxed on dividends received.

Subchapter S Corporations: Also known as “S corps,” this less-common corporation form passes its income or losses through to the shareholders. They then report those gains or losses on their individual tax returns. It’s sort of like a corporation that is treated like a partnership for tax purposes. These are limited to 100 shareholders or fewer, and can only issue one type of stock.

Question 39

True of False ?

C corps are subject to double taxation, while S corps are not.

Answer 39

From a legal standpoint, a corporation is considered to be a person.

Question 40

Limited Liability Companies & Limited Liability Partnerships

Answer 40

Limited liability companies (LLCs) and limited liability partnerships (LLPs) are two other kinds of business entities that can own property (as well as operate other kinds of businesses). They both combine some aspects of corporations with some aspects of partnerships.

Additionally, both LLCs and LLPs are regulated at the state level, and have state-by-state laws outlining the kinds of businesses that can form LLPs and LLCs, as well as details about how these entities are created, function, and are dissolved.

Question 41

LLCs

Answer 41

A limited liability company can be set up with one or more members. It’s not a corporation, exactly — it’s an “unincorporated association.” The owners of LLCs are called members.

LLCs can have as many members as they like, and corporations, foreign entities, regular people, and even other LLCs can be members. They aren’t required to do all of the reporting that corporations are required to do, and they aren’t taxed like C corps are — LLCs are pass-through entities.

LLC members can manage the business themselves, or hire someone else to do it. Though the LLC structure protects members from personal liability for business debts, they can be held liable if another member does something illegal.

Many states have regulations that prevent certain types of businesses, such as financial services businesses, from operating as LLCs.

In Virginia, the Virginia Limited Liability Company Act spells out the rules for forming and running an LLC.

Question 42

A limited liability partnership (LLPs)

Answer 42

A limited liability partnership (LLP) is a kind of partnership arrangement. It’s similar to a limited partnership, except that all partners have limited liability — there is no general partner. Instead, any partners can be involved in management, but are still shielded from liability.

Partners cannot be held personally responsible for other partners’ mistakes, though their investment in the partnership can still be at risk. Many medical practices are organized as LLPs, because the partners are protected from other partners’ potential malpractice suits.

The limits in the limited liability of the partners in an LLP depend on the laws in the state where it was formed.

Like all partnership arrangements, LLPs are not taxed as an entity. Instead they are a pass-through structure, where profits and losses are claimed on the partners’ tax returns.

Question 43

Both LLCs and LLPs

Answer 43

In other words, both LLCs and LLPs enjoy the partial liability shield of a corporation and the pass-through taxation structure of a partnership. That said (as with S corps) some state governments might impose a state tax on these types of business organizations.

The requirements vary from one state to another regarding the formation of LLPs and LLCs.

Question 44

What is one difference between a limited partnership and an LLP?

Answer 44

A limited partnership has a general partner who is personally liable, whereas an LLP does not.

Question 45

Syndicates

Answer 45

A real estate investment syndicate is a group of investors that get together and combine resources to make investments they wouldn’t be able to make on their own. Forming a syndicate is known as syndication.

It’s important to note that “syndicate” is not a legal term like corporation, partnership, or trust (though a syndicate can be created as any of these business forms).

How a syndicate operates depends on how it’s organized.

Question 46

The Parts of a Syndicate

Answer 46

Generally, a syndicate will have one sponsor and a group of investors.

The sponsor, also known as the syndicator or the organizer, is the active manager of the endeavor. The investors are passive members, providing just their cashola. The sponsor builds the investment group and directs the project, charging the investor group fees for their work.

If a sponsor invests their own money (in most cases they will need to co-invest at least 5% of the equity requirement), they also collect their share of the profits when the property is sold.

Question 47

What Do Syndicates Do?

Answer 47

While syndicates can be used for something as simple and straightforward as purchasing a single-family residence, they are typically created for the financing of large commercial real estate projects, including:

Multi-family apartment complexes

Office space

Retail centers

Industrial buildings

Question 48

Why Syndicates?

Answer 48

By pooling limited financial resources with others who are similarly situated, a small-scale investor may participate in the ownership and operation of a piece of property that is too much to handle alone or in a joint venture with one or two others.

Syndication also offers professional management, which might not otherwise be economically feasible for the small investor. Professional management, the basic commodity that the syndicator has to offer, is crucial to successful syndication.

Question 49

Which of the following about the real estate investment syndicate is TRUE?

Answer 49

Syndicators provide professional management for small investors.

Question 50

Joint Ventures: A Single Syndicate

Answer 50

A joint venture is a kind of syndicate that, instead of being an ongoing investing group, is a one-off collaboration.

Investors merge their finances together for one project or venture, and, after the venture is finished, the investors part ways. Love is fleeting, and so are joint ventures, Desh.

While it can take on a variety of partnership forms, the most popular form for a joint venture to take is the LLC.

Typically, a joint venture will have one operating partner (like a general partner, but without the liability) who brings real estate expertise to the relationship, and one or several capital partners, or investors.

Question 51

Which of the following best describes a joint venture?

Answer 51

While in most partnerships, the partners will continue doing business together until they end the partnership, in a joint venture, investors plan to part ways after the stated venture is finished.

Question 52

Real Estate Investment Trusts (REIT)

Answer 52

A real estate investment trust (REIT) is a special kind of syndicate, organized as a trust, that owns (and typically operates) income-producing real estate or real estate assets ( loans and mortgages). They are sort of like mutual funds for real estate — investors buy shares in the trust, which they can sell at any time. The trust uses the money to purchase and manage property or mortgages.

Many REITs are registered with the SEC and are publicly traded on a stock exchange. These are known as publicly traded REITs.

They provide a way for individual investors to earn a share of the income produced through commercial real estate without having to buy the properties. REITs pool the resources of individual investors who would not be able to fund, get financing, or manage a real estate undertaking on their own.

According to REIT research group Nareit:

REITs of all types collectively own more than $3 trillion in gross assets across the U.S.

Question 53

Which of these statements does NOT describe a typical REIT?

Answer 53

Choices Are:

1. It may be publicly traded.
2. The investors can buy and sell shares like stocks.
3. It’s a one-time venture.
4. It’s a way for investors to pool their money and extend their reach.

and the answer is:
 #3   It's a one-time venture.

Question 54

Lack of Disadvantages

Answer 54

REITs avoid some of the disadvantages that come with typical real estate investments:

Buying and managing property: The investor who chooses a REIT doesn’t have to go out and find a house, apartment complex, or a plot of land to buy, nor do they have to worry about managing that property.

Illiquidity: REITs also overcome one of the biggest challenges with traditional real estate investing — illiquidity. Many REITs are traded on the stock market, and investors can buy and sell shares as easily as stocks.

All or nothing risk: The small investor who purchases a single-family home has an all-or-nothing investment in their property. If it’s vacant, they’re not making money. REITs allow investors to mitigate some risk by spreading their ownership interest across all the properties the REIT owns.

Lack of scale: A small investor can magnify their reach without increasing their investment with a REIT. Lower-dollar investors can access equity in large-scale projects and commercial investments that would otherwise be impossible.

Question 55

Which of these is NOT a reason REITs are appealing to investors?

Answer 55

The choices are:

1. They are generally not subject to double taxation.
2. They get hands-on involvement in choosing the real estate to purchase.
3. They are safer than stocks, but with higher yields than bonds.
4. They are more liquid than typical real estate investments.

and the answer is : 
#2.  REIT investors are not hands-on investors.

Question 56

The Three Types of REITs

Answer 56

REITs generally fall into three categories:

Equity REITs
Mortgage REITs
Hybrid REITs

Equity REITs
Equity REITs own or operate income-producing real estate. Most REITs are equity REITs — in fact, if you hear someone referring to just a “REIT” without clarifying, they’re probably talking about an equity REIT. Usually, equity REITs specialize in one type of real estate — for example, malls or houses or hotels or office buildings.

Mortgage REITs
Mortgage REITs, sometimes called mREITs, make money by buying or originating loans or mortgage-backed securities. Essentially, they provide financing for both residential and commercial property. Mortgage REITs allow people to invest in the mortgage market with the ease and transparency of a stock or mutual fund purchase. Fewer than 10% of REITs are mREITs.

Hybrid REITs
You’re a smart cookie, Desh. So, I bet you can guess what hybrid REITs are. That’s right, they’re REITs that invest in both income-producing property AND mortgages and mortgage-based securities. Hybrid REITs’ more diversified holdings hedge against the risk of investing in just one kind of thing.

Question 57

What is the most common type of REIT?

Answer 57

1. hybrid REIT
2. nonprofit REIT
3. mortgage REIT
4. equity REIT

answer is :
#4 equity REIT

Equity REITs are the most common type of REIT.