What is a real estate investment trust (REIT)?

A real estate investment trust (REIT) is primarily defined as a company that owns, operates, or finances income-producing real estate. This structure allows individuals to invest in large-scale, income-generating real estate without having to buy and manage properties directly. REITs typically own and manage a portfolio of real estate assets such as commercial buildings, apartments, and hotels, generating revenue primarily through leasing space and collecting rents.

Investors benefit from REITs as they provide a way to earn a share of the income produced through real estate investments without actually having to buy, manage, or finance any properties themselves. Additionally, REITs are often required by law to distribute a significant percentage of their taxable income to shareholders in the form of dividends, making them an attractive investment for income-seeking investors.

Understanding this definition is crucial for anyone involved in real estate investment or finance, as it highlights an important vehicle for diversification in property investment beyond direct ownership.