What is REIT?

Real Estate Investment Trust (or REIT). A business trust or corporation formed under federal and state statutes for the purpose of investing in real estate.

A Real Estate Investment Trust is a company that owns, operates, or finances income-generating real estate properties. It is a type of investment vehicle that allows individuals to invest in real estate without directly owning or managing properties. REITs pool capital from multiple investors to invest in a diversified portfolio of properties, such as office buildings, shopping malls, apartment complexes, hotels, warehouses, or other types of real estate assets.

REITs are structured as publicly traded companies and are listed on major stock exchanges. They offer shares to the public, allowing investors to buy and sell these shares on the stock market. By investing in REITs, individuals can gain exposure to real estate assets and potentially benefit from the income generated by the properties and the appreciation in their value.

To qualify as a REIT, a company must meet certain requirements set by tax authorities. In the United States, for example, a REIT must distribute at least 90% of its taxable income to shareholders in the form of dividends. By doing so, REITs can avoid paying corporate income tax, but the dividends received by shareholders are generally subject to regular income tax.

REITs provide a way for individual investors to participate in the real estate market, which traditionally requires significant capital and expertise. They offer the potential for regular income through dividend payments and the potential for capital appreciation if the value of the underlying real estate properties increases. It's important to note that investing in REITs carries risks, including market fluctuations, interest rate changes, and specific risks related to the real estate sector.