What is a Real Estate Investment Trust (REIT)?

A Real Estate Investment Trust, commonly known as a REIT, is accurately described as a company that owns, operates, or finances income-producing real estate. REITs are structured to provide a way for individual investors to earn a share of the income produced through commercial real estate ownership without actually having to buy, manage, or finance any properties themselves.

Typically, REITs operate by pooling the capital of many investors to purchase and manage a diversified portfolio of real estate, such as office buildings, shopping malls, apartments, and hotels. By law, REITs must distribute at least 90% of their taxable income to shareholders as dividends, making them an attractive investment option for individuals looking for regular income in the form of dividends.

This structure allows investors to benefit from the real estate market while minimizing some of the risks and responsibilities associated with direct property ownership. In contrast, other options provided do not capture the essence of what a REIT is and how it functions in the real estate sector.