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What is a REIT?

REIT stands for a real estate investment trust—a type of specialized company that lets its investors get real estate exposure in their stock portfolios. Each unit in a REIT represents a certain fraction of ownership in each of the properties that REIT has.
Modeled after mutual funds, historically, REITs have provided investors with long-term capital appreciation, diversification and regular income streams.
There are many types of REITs. Most are traded on stock exchanged, but some are also non-traded. In addition, there are equity REITs, which manage and own properties like shopping malls, office and apartment buildings (to name a few) and there are mortgage REITs, which invest in mortgage-backed securities. (There are also some REITs that are a hybrid of the two).
REITs have a special tax status, where they have to be taxed first at the trust level, then to beneficiaries, so instead of passing through profits, they pass cash flow directly to unitholders.
As for investment, REITs have historically delivered competitive total returns. REITs are also a good portfolio diversifier that can provide high dividends.

 

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