REIT (Real Estate Investment Trust)
A REIT is a company that owns, operates or finances income-producing real estate and must pay out most of its taxable income to shareholders as dividends.
Real estate investment trusts let investors own a share of large property portfolios such as apartments, offices, warehouses, cell towers or data centers without buying buildings themselves. Many REITs trade on stock exchanges like ordinary shares, and REIT ETFs bundle dozens of them.
To qualify as a REIT under US tax law, a company must distribute at least 90% of its taxable income to shareholders. In return, it generally avoids corporate income tax on that income. This structure makes REITs known for relatively high dividend payouts, although most REIT dividends are taxed as ordinary income rather than at lower qualified-dividend rates.
Equity REITs earn rent from properties they own, while mortgage REITs earn interest from real estate loans. REIT prices are sensitive to interest rates, because higher rates raise borrowing costs and make bond yields more competitive with REIT dividends.
Example: buying shares of a warehouse REIT gives you indirect exposure to rental income from logistics properties.