What is a Real Estate Investment Trust (REIT) required to have in terms of investors?

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate while providing a way for individual investors to earn a share of the income produced through commercial real estate ownership without actually buying, managing, or financing any properties themselves.

In order for a REIT to qualify for certain tax benefits, it is required to have a minimum number of investors, which is typically set at 100. This requirement ensures that the REIT has a broad base of investors, thus promoting diversification and reducing risk concentration among a small number of individuals. By having a larger group of investors, a REIT increases its legitimacy and stability, allowing it to operate under the favorable tax guidelines established by the IRS, which can lead to exemption from corporate income tax and enable it to distribute the majority of its taxable income to shareholders in the form of dividends.

The focus on having at least 100 investors aligns with regulatory frameworks designed to protect investors and ensure that the REIT operates in a manner that benefits a diverse investor group, rather than catering to the interests of just a few individuals.