A REIT owns, operates, or finances income-producing properties or real estate-related assets and must meet the following criteria:

• Distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends;

• Be an entity that would be taxable as a corporation but for its REIT status;

• Be managed by a board of directors or trustees;

• Have shares that are fully transferable;

• Have a minimum of 100 shareholders after its first year as a REIT;

• 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 and cash;

• Derive at least 75 percent of its gross income from real estate related sources, including rents from real property and interest on mortgages financing real property;

• Derive at least 95 percent of its gross income from such real estate sources and dividends or interest from any source; and

• Have no more than 25 percent of its assets consist of non-qualifying securities or stock in taxable REIT subsidiaries.

There are three types of REITs. Equity, mortgage, and hybrid REITs.