MENU
EDU Articles

Learn about investing, trading, retirement, banking, personal finance and more.

Ad is loading...
Help CenterFree ProductsPremium Products
IntroductionMarket AbbreviationsStock Market StatisticsThinking about Your Financial FutureSearch for AdvisorsFinancial CalculatorsFinancial MediaFederal Agencies and Programs
Investment PortfoliosModern Portfolio TheoriesInvestment StrategyPractical Portfolio Management InfoDiversificationRatingsActivities AbroadTrading Markets
Investment Terminology and InstrumentsBasicsInvestment TerminologyTradingBondsMutual FundsExchange Traded Funds (ETF)StocksAnnuities
Technical Analysis and TradingAnalysis BasicsTechnical IndicatorsTrading ModelsPatternsTrading OptionsTrading ForexTrading CommoditiesSpeculative Investments
Cryptocurrencies and BlockchainBlockchainBitcoinEthereumLitecoinRippleTaxes and Regulation
RetirementSocial Security BenefitsLong-Term Care InsuranceGeneral Retirement InfoHealth InsuranceMedicare and MedicaidLife InsuranceWills and Trusts
Retirement Accounts401(k) and 403(b) PlansIndividual Retirement Accounts (IRA)SEP and SIMPLE IRAsKeogh PlansMoney Purchase/Profit Sharing PlansSelf-Employed 401(k)s and 457sPension Plan RulesCash-Balance PlansThrift Savings Plans and 529 Plans and ESA
Personal FinancePersonal BankingPersonal DebtHome RelatedTax FormsSmall BusinessIncomeInvestmentsIRS Rules and PublicationsPersonal LifeMortgage
Corporate BasicsBasicsCorporate StructureCorporate FundamentalsCorporate DebtRisksEconomicsCorporate AccountingDividendsEarnings

What is a REIT?

A Real Estate Investment Trust (REIT) is a pooled investment with a high dividend yield that invests in real estate.

REITs give investors an opportunity for participation and diversification in real estate investments, while also offering much higher degrees of liquidity and lower buy-in amounts than can be found in other real estate investments. A REIT operates much like a mutual fund, and would technically be taxable as a corporation if it weren't for its REIT status.

REITs must distribute 90% of earnings each year to the shareholders (in the form of dividends), and the tax burden falls on the investors. A DRIP is a Dividend Reinvestment Plan, which allows shareholders to reinvest the distributed dividends efficiently to capture the potential of compounding interest.

There are Equity REITs, in which investors hold shares of income-producing real estate, and Mortgage REITs, which either finance mortgage loans or acquire mortgage-backed securities, and there are REITs which are a hybrid of the two strategies.

Investors can also buy shares of REIT mutual funds or ETFs, which may be indexed or actively managed. REITs are often referred to as Alternative Investments, which offer diversification in assets low in correlation to other major asset types.

In recent years, however, many advisors consider REITs to be a core holding, due in part to their ubiquity and in part to the emergence of other liquid assets which offer even lower correlation to traditional investments.

What is a Hybrid REIT?
What is an Equity REIT?

Ad is loading...