Specialist · Bradenton, FL · Member since 2015 · 12 posts · 3 votes
Hello, I am brand new in all this, and trying to learn the basics on some things. I have a question regarding REITs. From what I understand, equity REITs make money for their shareholders by paying out dividends on whatever the properties produce, and 90% of income must be paid out in dividends. My question is, how would someone who starts their own REIT be paid? Would it be based strictly on their ownership shares also? Or are there other benefits? What if someone were to depend solely on investment capital from other investors to start? Would they essentially be "bought out" before even getting started? I suspect that's probably the case, but just wanted to throw it out there. Thanks!
Sponsors can earn various fees, including acquisition, asset management, refinance, and disposition, from a syndication standpoint. REITs are a bit different, but many of the ideas are similar. This article summarizes it pretty well. Don't worry, REITs are Wall Street entities, so sponsors are going to get paid!
Instead of limiting yourself to REITs only, look into other legal structures that may be more beneficial and have their own pro's and con's. For instance you can set up a fund that invests in real estate via syndications that offer tax benefits to investors where REIT produce purely ordinary income. I suggest you reach out to a securities attorney to discuss various legal structures. PM if you need recommendations.