Real Estate Investment Trust (REIT)

Written By August Jepsen

A real estate investment trust (REIT) is a company or trust that owns, operates, or finances income-producing real estate, allowing investors to participate in the real estate market without directly owning physical properties. REITs are modeled after mutual funds, pool capital from many investors, and typically trade publicly like stocks, offering liquidity and accessibility. They must distribute at least 90% of their taxable income as dividends to shareholders and can invest in properties such as office buildings, apartment complexes, shopping malls, hotels, warehouses, cell towers, or in mortgages and mortgage-backed securities.​

REITs fall into three main categories:

  • Equity REITs: Own and operate real estate for rental income.​

  • Mortgage REITs (mREITs): Provide or purchase mortgages and earn income from interest.​

  • Hybrid REITs: Combine equity and mortgage strategies, though are less common.​

REITs provide regular income, diversification, and portfolio growth potential, but dividend distributions are generally taxed as ordinary income rather than qualified dividends. Federal law regulates REIT structure and operations, and most public REITs trade on major stock exchanges.

August Jepsen
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