Real Estate Investment Trust - REIT

AAA

DEFINITION of '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 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 EXPLAINS 'Real Estate Investment Trust - REIT'

Individuals can invest in REITs either 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). Among other things, REITs invest in 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. Investing in REITs is a liquid, dividend-paying means of participating in the real estate market. 

Need more details on the REIT? Read The REIT Way and Add Some Real Estate to Your Portfolio.

VIDEO

Loading the player...
RELATED TERMS
  1. UPREIT

    Short for umbrella partnership real estate investment trust, ...
  2. DownREIT

    A joint venture between a real estate owner and a real estate ...
  3. Non-Traded REIT

    A form of real estate investment method that is designed to reduce ...
  4. Captive Real Estate Investment ...

    A real estate investment trust (REIT) that is controlled by a ...
  5. Funds Available For Distribution ...

    An informal measure of the amount of capital that is on hand ...
  6. Funds From Operations Per Share ...

    A metric for the performance of a real estate investment trust ...
RELATED FAQS
  1. How have low interest rates affected the real estate sector?

    Low interest rates stimulate the real estate sector by encouraging home-buying activity and by making it less expensive for ... Read Full Answer >>
  2. What are the main segments of the real estate sector?

    The main segments of the real estate sector are residential real estate, commercial real estate and industrial real estate. ... Read Full Answer >>
  3. How can I calculate the Macaulay duration of a zero-coupon bond?

    The funds from operations is a measure of the amount of cash flow that a business's operations generates. Real estate investment ... Read Full Answer >>
  4. What kinds of companies are the best candidates for evaluation using the Gordon Growth ...

    The Gordon growth model, also known as the dividend discount model (DDM), is used to calculate the intrinsic value of a company ... Read Full Answer >>
  5. Which are the most popular mutual funds that target the financial services sector?

    Among the top-rated and most popular mutual funds that invest in the financial services sector are the Royce Financial Services ... Read Full Answer >>
  6. What is the difference between book value per common share and NAV (net asset value)?

    Book value per common share, also known as book value per equity of share or BVPS, is used to evaluate the stock price of ... Read Full Answer >>
  7. Is NAV the best way to assess the value of an REIT?

    The net asset value (NAV) is an excellent metric to use when assessing the value of a real estate investment trust (REIT). A ... Read Full Answer >>
  8. What is the difference between a REIT and a master limited partnership

    Real estate investment trusts (REITs) and master limited partnerships (MLPs) are both considered pass-through entities under ... Read Full Answer >>
  9. What are the pros and cons of owning an equity REIT versus a mortgage REIT?

    There are several different types of real estate investment trusts (REITs) including equity REITs, mortgage REITs and hybrid ... Read Full Answer >>
  10. What is the difference between a REIT and a real estate fund?

    Both real estate funds and real estate investment trusts (REITs) are used when diversifying a long-term investment portfolio. ... Read Full Answer >>
  11. What are the potential pitfalls of owning REITs?

    Real estate investment trusts (REITS) are corporations, trusts or associations that own or finance income-producing real ... Read Full Answer >>
  12. What is real estate crowdfunding?

    Crowdfunding is a new tool for raising money for businesses and an easier way to access such ventures for investors. It utilizes ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    Add Some Real Estate To Your Portfolio

    From REITs to owning your own home, find out how diversify your portfolio with real estate assets.
  2. Taxes

    The Basics Of REIT Taxation

    The unique tax advantages offered by these investments can translate into superior yields.
  3. Home & Auto

    Introduction To International REITs

    Avoid being left behind as REITs expand beyond U.S. borders.
  4. Home & Auto

    How To Analyze Real Estate Investment Trusts

    REITs are much like dividend-paying companies, but analyzing them requires consideration of the accounting treatment of property.
  5. Options & Futures

    The REIT Way

    Ever considered investing in real estate? Read about the REIT and see if it's the investment for you.
  6. Home & Auto

    Simple Ways To Invest In Real Estate

    Owning property isn't always easy, but there are plenty of perks. Find out how to buy in.
  7. Entrepreneurship

    Find Fortune In Commercial Real Estate

    Investing in big buildings means big money - and bigger risks.
  8. Bonds & Fixed Income

    The Impact Of Interest Rates On Real Estate Investment Trusts

    REITs are high-yield investments, but do they have an inverse relationship with interest rates? Find out here.
  9. Home & Auto

    Exploring Real Estate Investments

    Discover how owning properties can give you a roof over your head or a check in your pocket.
  10. Professionals

    Alternatives Need More Education, Not Enforcement

    While disclosures and investor education need improvement, alternatives provide a valuable way to increase yield and hedge against declines.

You May Also Like

Hot Definitions
  1. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  2. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  3. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  4. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  5. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  6. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
Trading Center