A real estate investment trust, commonly called a REIT, pools investments from a variety of investors in order to purchase properties. These properties become an asset for the real estate holding company. In some cases a REIT purchases mortgage loans.

Investment holding firms can hold residential or non-residential properties. Regardless of the type of properties it holds, the goal of the REIT is to make the investors money. This can be done in a several ways, which include:

1. Purchasing properties at wholesale or at discounted rates and selling them through the real estate investment trust for a profit.

2. Fixing and flipping properties to gain better yields.

3. Renting properties held by the trust holding service at rates over the costs to bring in continued income.

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Understand how real estate holding companies work

Like most investment opportunities, investment holding companies must abide by rules and regulations. And there are different types of holding companies. Which one you choose to do business with depends on your investment goals.

I recommend: Architecture411 provides in-depth information on the different types of real estate investment companies, including a description of a hybrid REIT. It also lists the qualifications REITs must have to receive tax advantages. HowStuffWorks covers investing in an REIT and presents graphs and charts to help you understand the payout.

Find a real estate trust holding company that pays high dividends

Working with real estate investment trust holding companies provides you with the opportunity to see a high return on your investment. In order to qualify as a REIT, the corporation must pay out at least 90% of its profit to the shareholders, or the investors. However, if a company pays high salaries to organizational members, you might not get what you expect.

I recommend: MSN Money provides an overview of what real estate investment trusts do, how they pay dividends and offers advice on choosing an REIT. The Wall Street Journal Online posts an article with top-producing REITs. The National Association for Real Estate Investment Trusts provides a list of 200 publicly traded REITs.

Hire a company to handle your investment with a trust holding service

A professional financial consultant pays attention to the market and can help you with the market side of your investment. The professional may manage your entire REIT portfolio, depending on the agreement you have with them. Usually the consultant takes a percentage of your profit, but it may be worth it to have her handle all the details.

I recommend: Stradley Ronon Stevens & Young helps broker and transfer investments in REITs. They also provide advise and strategies for tax planning. R J Bland Investments offers investment products and services, facts on REITs and other information.

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• •  Land holding companies are often real estate investment trusts dealing specifically with land. The company may work with either undeveloped or developed land.

Land holding companies and real estate holding companies often organize themselves as a real estate investment trust. They sometimes acquire land on a speculative basis, when they think there will be demand for development later on.

As an investor, you can purchase shares of publicly traded real estate holding companies that buy land, develop it and then act as investment holding companies to generate long-term revenue. The returns can vary based on the state of the market, but over a 15-year period, real estate investments have beat the S&P and Dow Jones Industrial Average.

Land holding companies specialize in holding land that is later developed into the following property types:

1. Office

2. Retail

3. Residential

4. Hospitality

5. Industrial

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Public or private real estate holding firms

There are risks to any investment. Some investment holding companies are publicly held real estate investment trusts, regulated by the SEC and traded on the New York Stock Exchange. Other land holding companies are private and only accept investors on a limited basis or during a fund-raising period.

I recommend: Public real estate trust holding companies are Forest City Enterprises, Inland Real Estate Corp and American Land Lease. Privately-held commercial real estate holding companies are Bixby Land Co. and Watson Land Company.

Invest in real estate investment holding companies that interest you

If you invest in a real estate investment trust that focuses in land or property holdings, find one specializes in something which you find interesting. There is a wide range of companies specializing in office, residential, industrial, retail or hotel properties. Some are involved in all of the above.

I recommend: First Industrial Realty Trust specializes in industrial properties and Taubman Centers in retail property. Sun Communities specializes in manufactured residential properties, Hospitality Properties Trust buys, owns and leases hotels and Duke Realty Corp. has a large portfolio of office holdings.

Forming land holding companies

To form a real estate holding company there are regulations to comply with which vary state to state. Overall, publicly-traded real estate investment trusts must be registered with the SEC. Tax laws can vary widely from state to state, so be sure to check with the applicable laws in your state or hire an attorney to be sure the company is in compliance with the law.

I recommend: The National Association of Real Estate Investment Trusts offers resources for companies that wish to form REITS.

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Helpful advice for making the most of this Guide

• •  Before investing in any type of investment holding company or real estate investment trust, be sure to know what the risks are, know about the quality of the management and look at the potential returns for the holdings.

Having a concise strategy and clearly defined goals and division of tasks among business owners will help companies in making the most of real estate investment trust holding companies. Developing real estate holding companies is a popular way in which individual real estate investors, investor groups and consortiums acquire and manage residential and commercial investment properties.

Individuals can invest in real estate investment trust companies by purchasing shares directly or by investing in a mutual fund that focuses on commercial real estate. There is a range of properties in which real estate investment holding companies typically invest including shopping centers, office buildings, warehouses, apartments, hotels, condominiums and mortgages secured by real estate. Consider the following tips on making the most of real estate investment trust holding companies.

1. Gain knowledge about the potential wealth provided by real estate investment trust companies.

2. Research federal and state regulations imposed on real estate holding companies.

3. Get professional advice about real estate investment trust companies.

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Research the earning potential of real estate holding companies

Investing in a real estate investment trust company can be a wise investment for some. Created by Congress in the 1960s, real estate investment trust companies have grown to become important investment vehicles in the United States. In the past decade, the equity market capitalization of U.S. real estate holding companies has more than tripled from approximately $90 billion to more than $300 billion. You can make the most of your investment by investigating this earning potential.

I recommend: Learn more about making the most of real estate holding companies by visiting REIT.com. You can also learn more about land holding companies and real estate holding companies by reading information about the Pennsylvania Real Estate Investment Trust, one of the first U.S. equity real estate investment trusts.

Stay abreast of tax laws affecting investment holding companies

Companies wishing to qualify as a real estate investment trust company in the United States must comply with regulations specified by the Internal Revenue Code. These guidelines require that a company invest a minimum of its total assets in real estate, which should be 75 percent or more. They must also acquire at least this same percentage of its gross income from property rental income or mortgage interest and then distribute at least 90 percent of its taxable income to shareholder dividends each year. To make the most of your investments while following the state and federal laws governing these investments, it's imperative that you know all these regulations.

I recommend: Check out Gallagher, Callahan & Gartrell to learn more about state-specific tax laws that affect commercial real estate holding companies. Read more about real estate investment holding companies by visiting the Securities and Exchange Commission website.

Seek professional advice on real estate investment trust companies

Diversifying your portfolio by investing in properties that vary in size, location and activity is one way in which to decrease the risk of real estate holding company investments and make the most of these investments. Because, real estate investment trust holding companies are complex investments and can lead to considerable loss, it's a good idea to discuss your goals with a financial professional before you invest, as there are three primary types of real estate investment.

I recommend: Learn more about the complexity of real estate holding companies by visiting The Money Alert. Read more about investing in real estate investment trust companies by visiting Moolanomy.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Prior to investing in real estate, it's critical that you develop an in-depth understanding of the primary types of real estate investment trusts to make the most of property investments. These include a hybrid real estate investment trust, a mortgage real estate investment trust and an equity real estate investment trust.

Real estate investment trust holding companies are also known as REITs. There are many types of these investment holding firms that work in different areas of real estate. From purchasing and holding land to building and leasing and fixing and flipping, real estate investment trust holding companies deal with many types of investment properties. When deciding whether to work with a REIT or real estate holding company, you need to be aware of the different types of REITs and learn about some key terms so you can evaluate whether a company is worth the investment risk.

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Hybrid REIT

Hybrid REITs are a combination of an equity and a mortgage REIT. These real estate investment trusts own properties and make loans to finance other individuals' real property.

I recommend: National Payday has an in-depth definition of hybrid REITs.

Equity REIT

Equity REITs own a portion of the real property with which they are dealing. The activities of these REITs include leasing, tenant and property services and real property development.

I recommend: RiskCenter offers a tutorial on equity REITs.

Mortgage REIT

Mortgage real estate investment trusts extend mortgage credit on their own properties. They can also lend or own loans with real property as the collateral.

I recommend: Morningstar publishes a financial outlook on mortgage REITs that explains the business model.

Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO)

The AFFO is a calculation meant to determine a real estate investment company's cash flow from its operations. It is a complicated formula, but simply put, you take funds from operations, or FFO, and subtract maintenance or capital expenses.

I recommend: Investopedia has an entry on REITs that explains the importance of the FFO.

Equivalent yield

The equivalent yield refers to an investment property's rate of return. This rate or yield is an attempt to discern actual cash flow rents and is based on the gross purchase costs of an investment property.

I recommend: The Urban Land Institute has an excellent article for REIT investors that includes a discussion of the equivalent yield.

Net Asset Value (NAV), or liquidating value

NAV describes the value of a company or corporation's assets minus the its liabilities. The NAV is calculated in different ways, depending on the type of company and the areas of business involved. The NAV is an important ratio to look at when determining how well a REIT is doing.

I recommend: Forbes.com has an article on evaluating REITs that points out various figures to look at, including the NAV.