What is a Real Estate Investment Trust (REIT)?
What is a REIT?
In simple terms, a REIT, Real Estate Investment Trust, is a professionally managed trust that holds real estate assets and provides consistent, periodic payouts to its investors.
Below are more details about what defines a REIT:
Combines the capital of many investors to acquire or provide financing for a diversified portfolio of real estate investments under professional management;
Is able to qualify as a “real estate investment trust” under the Internal Revenue Code of 1986, as amended, the Code, for U.S. federal income tax purposes and is therefore generally entitled to a deduction for the dividends it pays and not subject to U.S. federal corporate income taxes on its net income that is distributed to its shareholders. This treatment substantially eliminates the “double taxation” (taxation at both the corporate and shareholder levels) that generally results from investments in a corporation; and
Generally pays distributions to investors of at least 90% of its annual ordinary taxable income.
What is StartEngine Real Estate REIT 1 LLC?
StartEngine Real Estate REIT 1 LLC is a StartEngine subsidiary that will invest in and manage a diversified portfolio of real estate assets such as commercial and residential properties.
Who chooses which assets to purchase for this trust?
Our Board is ultimately responsible for asset selection including decisions related to purchase, management and sales of our assets. Under the direction of the Board, Real Estate Investment Income Investors LLC or our Investment Manager has been delegated investment related responsibilities, including asset selection. Our Investment Manager will be advised by its affiliate, Aii Capital Management, LLC, an investment adviser registered with the
SEC. Registration with the SEC does not imply a certain level of skill or training.
What assets are held by the REIT?
Assets will not be identified or purchased until StartEngine Real Estate REIT 1 LLC reaches $1,000,000 in committed funds. Once the campaign reaches this point, keep an eye on the campaign page and your email for updates on acquisitions!
How is an investment in common shares of StartEngine Real Estate REIT 1 LLC different from investing in shares of a listed REIT or a traditional non-exchange traded REIT?
Differences from listed REIT:
The fundamental difference between our common shares and the shares of a listed REIT is the continuous liquidity available with a listed REIT. Although we intend to facilitate resales on StartEngine Secondary, an alternative trading platform, StartEngine Secondary is a new market entrant and it may never achieve the same liquidity available on more established trading platforms. Additionally, listed REITs are subject to more demanding public disclosure and corporate governance requirements than we will be subject to. While we are subject to the scaled reporting requirements of Regulation A, such periodic reports are substantially less than what would be required for a listed REIT that files reports pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Differences from traditional non-exchange REIT:
We neither charge nor pay any broker-dealer distribution fees, saving investors in upfront expenses as compared to a traditional non-exchange traded REIT. Traditional non-exchange traded REITs use a highly manpower-intensive method with hundreds to thousands of sales brokers calling on investors to sell their offerings. Our Administrative Manager has a low cost digital platform, which we intend to leverage in conducting this offering, thus reducing the financial burdens to us of offering our common shares. We expect that the organization and offering costs will be approximately $200,000; however, reimbursement payments can never exceed the 2% of the aggregate gross offering proceeds annually from this offering.
Please note IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. INVESTMENTS ON STARTENGINE ARE SPECULATIVE, ILLIQUID, AND INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE POSSIBLE LOSS OF YOUR ENTIRE INVESTMENT. Potential investors are strongly advised to consult their legal, tax and financial advisors before investing.