real estate investment trust

Real Estate Investment Trust - REIT

A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages.

REITs receive special tax considerations, and typically offer investors high yields as well as a highly liquid method of investing in real estate.

Equity REITs: Equity REITS invest in and own properties (thus responsible for the equity or value of their real estate assets). Their revenues come principally from their properties' rents.

Mortgage REITs: Mortgage REITs deal in investment and ownership of property mortgages. These REITs loan money for mortgages to owners of real estate, or invest in (purchase) existing mortgages or mortgage backed securities. Their revenues are generated primarily by the interest that they earn on the mortgage loans.

Hybrid REITs: Hybrid REITs combine the investment strategies of Equity REITs and Mortgage REITs by investing in both properties and mortgages.

Investopedia Commentary

Individuals can either invest in REITs by purchasing their shares directly on an open exchange or by investing in a mutual fund that specializes in public real estate. An additional benefit to investing in REITs is the fact that many are accompanied by dividend reinvestment plans (DRIPs). Amongst other things REITs invest in real estate, shopping malls, office buildings, apartments, warehouses, and hotels. Some REITs will invest specifically in one area of real estate, shopping malls for example, or in one specific region, state or country. Basically investing in REITs is a liquid, dividend paying means of participating in the real estate market.

Related Links

What Are REITs?
Basic Valuation of a Real Estate Investment Trust (REIT)
The REIT Way
The Impact of Interest Rates on Real Estate Investment Trusts

See also: Mortgage Backed Securities, Real Estate, Real Estate Limited Partnership

Also spelled: REIT