Real Estate Investment Trust (REIT) Definition
Define REIT In Simple Terms
In a REIT, the company owns and operates some income producing real estate.
A pool of investors contribute funds to the REIT to finance purchases and operations in return for a portion of the income.
Congress established REITs in 1960 as part of the Cigar Excise Tax Extension.
Before the creation of REITs, traditional real estate investors had to purchase and operate an entire property on their own, making it an investment opportunity only available to wealthy individuals.
Modern REITs allow investors to invest a small amount of money to finance a property along with other investors, opening up real estate as a viable option for those without the time or funds to own and operate property by themselves.
REIT portfolios can be composed of a variety of properties, including apartment complexes, warehouses, healthcare facilities, and infrastructure such as cell towers and energy pipelines.
Most REITs specialize in a particular sector of real estate, however some diversified REIT portfolios may consist of a variety of different real estate types.