real estate investment trust

Real Estate Investment Trust (REIT)

REITs invest in real estate or loans secured by real estate and issue shares in such investments. A REIT is similar to a closed-end mutual fund.

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Real Estate Investment Trust

An investment company that invests exclusively in real estate and mortgages. The REIT issues a fixed number of shares at its establishment, and afterward neither increases nor decreases the number of shares. An REIT is actively managed, meaning that the real estate underlying the trust change from time to time in accordance with the fund's investment goals. A shareholder may trade shares in the REIT as if they were stocks. The value of shares in a real estate investment trust is determined by supply, demand, and the trust's net asset value. Importantly, the REIT itself is not taxed; rather taxes are passed on to shareholders.

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real estate investment trust (REIT)

A company that purchases and manages real estate and/or real estate loans. Some REITs specialize in purchasing long-term mortgages while others actually buy real estate. Income earned by a trust is generally passed through and taxed to the stockholders rather than to the REIT. See also equity REIT, mortgage REIT.

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Real estate investment trust (REIT). REITs are publicly traded companies that pool investors' capital to invest in a variety of real estate ventures, such as apartment and office buildings, shopping centers, medical facilities, industrial buildings, and hotels.

After an REIT has raised its investment capital, it trades on a stock market just as a closed-end mutual fund does.

There are three types of REITs: Equity REITs buy properties that produce income. Mortgage REITs invest in real estate loans. Hybrid REITs usually make both types of investments.

All three are income-producing investments, and by law 90% of a REIT's taxable income must be distributed to investors. That means the yields on REITs may be higher than on other equity investments.

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real estate investment trust (REIT)

Congress passed the Real Estate Investment Trust Act of 1960 to allow small investors to pool their money into real estate investments and receive the same benefits as wealthier Americans who were able to purchase real property directly. REITs are special corporations that must invest only in real estate and must distribute at least 90 percent of their net income in the form of dividends,95 percent before 1999.In exchange,they are allowed to escape any income tax liability at the corporate level.

Many people describe REITs as real estate mutual funds, which is conceptually true except for one big difference: REITS are closed-ended funds,meaning investors cannot demand redemption of their shares,but can only trade them on the open market. With a real estate mutual fund (REMF) investors may demand redemption from the fund, even if the public market isn't buying. There is a wide variety of REITs:

• Overall, they are either equity REITs that invest in property or mortgage REITs that invest in mortgages.

• They are not allowed to operate high-management properties like hospitals or hotels, but they can hire outside companies for the management.

• REITs generally specialize in one of the following sectors: retail, health care, lodging, industrial, office, residential, or specialty (self-storage centers, restaurant properties, etc.). Some diversify across several sectors.

• Some are publicly traded on the stock exchanges, some are private, and some are unlisted. Unlisted REITS are also called non-exchange traded REITS; they file reports with the SEC but do not trade on the national stock exchanges. Private REITS do not file any reports with the SEC and are not traded on any national stock exchange.

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Real Estate Investment Trust (REIT)

What Does Real Estate Investment Trust (REIT) Mean?

A security that trades like a stock on an exchange; REITs invest directly in real estate through either properties or mortgages. REITs receive special tax considerations and typically offer investors high yields as well as opportunities to invest in the real estate market without buying properties. REITs include equity REITs, in which one invests in and owns properties and thus is responsible for the equity or value of the real estate assets; the revenues come principally from the properties' rents. Mortgage REITs involve investment in and ownership of property mortgages; these REITs loan money for mortgages to owners of real estate or purchase existing mortgages or mortgage-backed securities. The revenues are generated primarily by the interest earned on the mortgage loans. 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 by purchasing their shares directly on an exchange or by investing in a mutual fund that invests in 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 invest specifically in one area of real estate—shopping malls, for example—or in a specific region, state, or country. Investing in REITs is a liquid, dividend-paying means of participating in the real estate market.

Related Terms:
• Asset
• Derivative
• Dividend
• Mortgage-Backed Securities—MBSs
• Stock