A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate. REITs provide a way for individual investors to earn a share of the income produced through commercial real estate without having to buy, manage, or finance any properties directly. Here’s an overview of how REITs work, their benefits, and considerations for investors:
Structure and Operation of REITs:
Types of REITs:
- Equity REITs: These own and operate income-producing real estate. They earn rental income from properties such as office buildings, shopping centers, apartments, and hotels.
- Mortgage REITs (mREITs): These provide financing for income-producing real estate by purchasing or originating mortgages and mortgage-backed securities. They earn income from the interest on these investments.
- Hybrid REITs: These combine the characteristics of both equity and mortgage REITs, investing in both properties and mortgages.
