A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate. There are two main types: equity REITs, which own and manage properties, and mortgage REITs (mREITs), which invest in real estate loans.
To maintain their tax-advantaged status, REITs must distribute at least 90% of their taxable income as shareholder dividends. In exchange, they generally avoid corporate income tax on distributed earnings. Most REITs are publicly traded on major stock exchanges, providing liquidity similar to other stocks. They offer access to real estate sectors such as residential, office, retail, industrial, and specialized property like data centers or healthcare facilities. Equity REITs generate income mainly from rents and property operations, while mortgage REITs earn income from interest on real estate loans and mortgage-backed securities.
REITs are commonly used by investors seeking diversified exposure to real estate without owning physical properties. They can contribute to income-oriented portfolios due to consistent dividend payments, though they carry sensitivity to real estate market conditions and interest rate changes. Prices can move with property fundamentals, financing costs, and broader economic trends, making REITs a related but distinct asset class within the broader real estate category.
An investor holds shares of a publicly traded REIT that owns commercial properties to gain exposure to real estate income and dividend payments.
Equity REIT · Mortgage REIT · Dividend · Real estate · Diversification