What are REITs
Learn about the definition, types, sectors, and development history of Real Estate Investment Trusts
REITs Types
REITs Sectors
A REIT, or Real Estate Investment Trust, is a company that owns, operates, or finances income-producing real estate. Modeled after mutual funds, REITs historically provide investors with stable income streams, asset diversification, and long-term capital appreciation. Most REITs are publicly traded companies listed on major stock exchanges, but investors can also choose other types of REITs.
A REIT is a company that owns, operates, or finances income-producing real estate. REITs allow ordinary people to benefit from holding shares in valuable real estate, enjoying dividend-based income and total returns.
REITs allow anyone to invest in real estate asset portfolios in the same way they invest in other industries—by purchasing individual company stocks or through mutual funds or exchange-traded funds (ETF). REIT shareholders can share the generated income—without personally buying, managing, or financing properties.
Approximately 170 million Americans live in households invested in REITs through 401(k)s, IRAs, pension plans, and other investment funds.
What are the Different Types of REITs?
- Publicly Listed REITs — Registered with the SEC and traded on national stock exchanges.
- Public Non-Listed REITs — Registered with the SEC but not traded on national stock exchanges. Liquidity is typically more limited.
- Private REITs — Real estate funds or companies exempt from SEC registration, typically only sold to institutional investors.
From an investment category perspective, the two main categories are:
- Equity REITs — Generate income by collecting rent from long-term property holdings and selling properties.
- Mortgage REITs — Invest in mortgages or mortgage-backed securities related to commercial and/or residential properties.
What Types of Properties Do REITs Own?
Today, REITs invest in a wide range of real estate property types, from traditional sectors such as office buildings, residential, hotels, and retail, to digital economy sectors such as logistics, data centers, and communication towers.
US publicly listed REITs own approximately 570,000 properties and 15 million acres of timberland across the United States.
How Do REITs Make Money?
Most REITs operate on a simple and understandable business model: by leasing space and collecting rent, the company generates income, which is then distributed to shareholders as dividends. REITs must distribute at least 90% of taxable income to shareholders as dividends—most REITs actually pay out 100%.
Mortgage REITs do not directly own real estate but provide financing for real estate and earn income from the interest on these investments.
Why Invest in REITs?
REITs have historically provided competitive total returns thanks to high, stable dividend income and long-term capital appreciation. Their relatively low correlation with other assets also makes them excellent portfolio diversifiers, helping to reduce overall portfolio risk and improve returns.