The importance of investing in creating wealth is underscored by Warren Buffett’s career. However, very few have the business acumen of the “Oracle of Omaha” and have to depend on others’ expertise for managing wealth. This has given rise to investing vehicles like mutual funds, Real Estate Investment Trusts (REITs) and Master Limited Partnerships (MLPs).

1. What are the Similiar Things Between a MLP And REIT?
Author: Jim Knight
“Why not invest your assets in the companies you really like? As Mae West
said, "Too much of a good thing can be wonderful".”
− Warren Buffett, legendary investor and the third
richest man in the world.
The importance of investing in creating wealth is underscored by Warren
Buffett’s career. However, very few have the business acumen of the “Oracle
of Omaha” and have to depend on others’ expertise for managing wealth. This
has given rise to investing vehicles like mutual funds, Real Estate Investment
Trusts (REITs) and Master Limited Partnerships (MLPs).
While mutual funds have been around for some time, REITs and MLPs are
comparatively recent innovations. Both of them share some similarities and
differences.
A REIT is defined as “a tax designation for a corporate entity investing in real
estate that reduces or eliminates corporate income taxes. In return, REITs are
required to distribute 90 percent of their income, which may be taxable, into
the hands of the investors. The REIT structure was designed to provide a
similar structure for investment in real estate as mutual funds provide for
investment in stocks.”
A MLP is defined as “a limited partnership that is publicly traded on a securities
exchange. It combines the tax benefits of a limited partnership with the
liquidity of publicly traded securities. To qualify for MLP status, a partnership
must generate at least 90 percent of its income from what the US Internal
Revenue Service (IRS) deems "qualifying" sources. For many MLPs, these
include all manner of activities related to the production, processing or
transportation of oil, natural gas and coal.”
Now, let’s talk about the similarities between a Master Limited Partnership
(MLP) and a Real Estate Investment Trust (REIT).
One similarity, that has main implications for investors, is that they keep off
the corporate income tax, on both a state and federal basis. finally, the
investor’s share of the proceeds increases. Another major similarity that both
REITs and MLPs also share with ordinary shares, pardon the wordplay, is their
tradeability. Units of both REITs and MLPs are traded on stock exchanges just

2. like common stock.
Another similarity is that both REITs and MLPs are classified into three
categories each. REITs are of the following three types:
1.Equity REITs: These own real estate like offices, malls, etc.
2.Mortgage REITs: These lend money to real estate owners or buy existing
mortgages or mortgages backed securities.
3.Hybrid REITs: These are basically a mixture of the above two types - own
real estate and lend money to owners of real estate.
MLPS are of the following three types:
1.Roll-up: Multiple assets or small limited partnerships combined into a larger
limited partnership.
2.Rollout: A large, single multiple limited partnership like a corporation spins
off some of its assets into a separate multiple limited partnerships.
3.Roll-in: New assets put into a multiple limited partnership with a guarantee
to combine supplementary assets in future.
As is clearly seen, there is a lot that is common between these two investment
vehicles.
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