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What are REITs?

What are REITs?

REITs are pooled investments similar to mutual funds, but, like mutual funds, they can take many shapes.

They invest in different kinds of real estate and real estate-oriented assets, depending on the REIT, and sell ownership shares to investors. REIT is an acronym for Real Estate Investment Trust.

REITs are similar to mutual funds, except that they only invest in real estate properties and related companies and assets such as mortgages. REITs will define the scope of their investments and strategies in their prospectus, which may read something like “We invest only in commercial Real Estate” or “Only in residential houses in Las Vegas” while other REITs are very general.

90% of REIT’s profits have to be passed to investors, and this generally means that REITs pay high dividends and are an excellent income-producing security. Many large REITs are traded on standard stock exchanges and can be bought and sold in exactly the same way as the shares of Mutual Funds.

Keywords: real estate investments, asset allocation, dividends, pooled investments, pass-through entity, REITs,