What is a Real Estate Investment Trust (REIT)?

A Real Estate Investment Trust, or REIT, is an organization that is involved in some way with income-generating real estate, and then allows investors to pool their money as investments in those assets. REIT companies own, operate, and/or finance these properties, which allows people to invest in these locations, without being responsible for them.

As a way to protect investors, and to allow these companies to pay lower tax rates, REITs must meet certain requirements set by the IRS. And, depending on the properties they have available, there are several different types of REITs out there, some of the most common include:

  • Mortgage REITs: Often called mREITs, mortgage REITs allow investors to buy shares of residential and commercial mortgages. These make up approximately 10% of REIT investments and are relatively new to the market.1 This type of REIT invests in the mortgage of a property instead of its equity.

  • Office REITs: As indicated by their name, office REITS are focused on commercial office buildings. This is the most common type of REIT, and is beneficial because these tenants have the longest leases.

  • Health Care REITs: REIT properties in this category include hospitals, nursing homes, and similar properties. Success in this real estate choice is wholly dependant on the success of the healthcare system. Occupancy fees and insurance payments are incredibly important to this type of REIT.

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