Real Estate Operating Company - REOC
They operate buildings. Fix the washing machine #4 leak downstairs before it floods. Call the plumber for the backed up toilet in apartment 7-D. Get the gardener to actually mow the lawn instead of smoke it. Turn off the alarm when it rings if there's no reason for it to be on. Let new tenants see 11F after the blood is cleaned up and the apartment's ready to be shown again. Let Mrs. Windsor in her front door and charge her $40 for forgetting her key...again.
That's what an operating company does. They manage the building, the day-to-day operations of it, for the landlord. Good work if you have the patience of Job. And know how to fix a washing machine.
Related or Semi-related Video
Finance: What is REIT?8 Views
finance a la shmoop what is a REIT all right people let's start with the basics
the letters reet real estate investment trusts it's basically a mini mutual fund [REIT written on chalkboard]
for real estate investments think a chain of old age homes which might carry
a market value of a million bucks each but which throw off 80 grand a year in
net cash profits that is the entire chain of old-age homes throws off 80 [People with homes for heads appear]
grand a year in cash profits all right in melding together a whole bunch of old
age homes at least in theory the volatility of anyone home dying that's [Heart rate monitor appears]
the risk of it and then affecting the creditworthiness of the entire portfolio
of real estate holdings is lowered with scale a REIT can then borrow money more
liquidly or easily let the transaction cost $4 or a lot less and it can [Coins falling]
leverage its legal obligations and its meds buying process with scale because
it's a lot cheaper per pill to buy four million aspirin a month in just four
hundred along with volume deals on diapers and dentures that you know [Piles of diapers and dentures appear]
across a much bigger swath of buyers well REITs have been around for a while
ironically they came into existence as an extension of the cigar excise tax in [Man smoking]
1960 and extend as far in ownership as warehouses commercial office buildings
shopping malls where piercings happen in strange places and apartment complexes
of all shapes and sizes well to qualify as a read a company must invest at least [An apartment complex]
75% of its assets in real estate re there that they re NRB holding cash or
US Treasury bonds with the intent of investing in real estate it has to
receive at least 75% of its gross profits from real estate rentals it has
to pay out at least 90% of its taxable profits as dividends to its shareholders
annually and basically the government is saying well if you're gonna act like a [Man talking in congress]
REIT you actually have to be one you can't have 75 percent of your gross
profits in like oil dividends or dividends from tech companies if those
even exist well a REIT has to have at least a hundred shareholders and have
its ownership diversified such that at least half of its ownership shares are
held by five or more individuals like it has to actually look like a fund it
can't just be a shell corporation put up by one guy to uh you know take advantage [Man stood outside of Shell co.]
of the system well REITs are publicly available for
Joe Schmo to invest in they tend to pay a very high dividend and they grow asset
values at a modest premium to inflation like a few percent a year that is they
don't grow much but they pay a lot of cash dividend out and that's nice for [Cash falling]
old people so most of their payback to investors is
quote bond-like unquote and that's a REIT now keep an eye out for those bulk
diaper deals for grandpa and good luck dealing with the bulky diapers [Diaper throw into trash and woman appears]
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