What is a real estate investment trust (REIT)?

A real estate investment trust (REIT) is defined as a company that owns, operates, or finances income-generating real estate. This structure allows individual investors to earn a share of the income produced through commercial real estate ownership without having to buy, manage, or finance any properties themselves. REITs provide an opportunity to invest in large-scale, income-producing real estate, and they are typically traded on major stock exchanges.

Investing in a REIT can be beneficial because they are required by law to pay out at least 90% of their taxable income to shareholders in the form of dividends, making them an attractive option for income-seeking investors. Additionally, they allow diversification of investments across a variety of real estate sectors such as residential, commercial, and industrial.

The other choices provide differing concepts related to real estate but do not accurately depict what a REIT is. For example, a company that provides loans for real estate purchases refers to mortgage lenders rather than an entity that owns or manages real estate. Partnerships among real estate developers are typically private collaborations with specific goals, while a regulatory body for real estate practices pertains to oversight and compliance, which is unrelated to the investment principles behind REITs.