REITs

Real estate investment trusts, or REITs, are companies that own, operate, or finance income-producing real estate. They provide a vehicle for individuals and institutions to invest in a diversified portfolio of real estate assets without directly owning properties. Most REITs are publicly traded, but non-traded and private REITs also exist. The main categories are equity REITs, which own and operate properties; mortgage REITs, which finance real estate through mortgages or mortgage-backed securities; and hybrid REITs, which combine both.

To qualify as a REIT in the United States, a company must meet certain requirements under the Internal Revenue Code. At least 75% of its assets must be real estate, cash, or U.S. Treasuries; at least 75% of gross income must come from real estate sources such as rents, interest on mortgages, or gains from real estate dispositions; and it must distribute at least 90% of its taxable income to shareholders as dividends. REITs are generally not subject to corporate income tax if they meet these conditions, with income taxes paid by shareholders on distributions. They must be managed by a board of directors or trustees and must comply with other ownership and reporting rules, including limits on share concentration.

Investors typically gain exposure to real estate income streams and potential capital appreciation, with liquidity consequences differing by structure. Public REITs trade on exchanges like stocks, offering transparency and regulated trading, while non-public REITs can be less liquid and carry different risk profiles. Globally, REIT-like structures exist under varying tax and regulatory regimes, collectively enabling diversified access to real estate markets.