What does a real estate investment trust (REIT) do?

A real estate investment trust (REIT) primarily owns, operates, or finances income-producing real estate. This structure allows individuals to invest in large-scale, income-generating real estate without having to buy or manage properties directly. By pooling their resources, investors in a REIT can enjoy the financial benefits of real estate ownership, including income from rents and appreciation in property value, while the REIT manages the properties effectively.

REITs typically invest in various types of real estate, such as residential complexes, commercial properties, and industrial facilities. They generate income primarily through leasing space and collecting rents on the properties they own and manage. Furthermore, REITs are required to distribute a significant percentage of their income to shareholders, making them an attractive option for income-seeking investors.

Other options do not fully encompass the broad operational capacity of a REIT: while some may involve buying and selling properties or financing transactions, the unique combination of ownership, operation, and financial functions that REITs provide distinguishes them in the investment landscape.