REITs, or Real Estate Investment Trusts, are companies that own, operate, or finance income-producing real estate across a wide range of property sectors. These sectors include office buildings, apartments, shopping centers, industrial warehouses, hotels, data centers, healthcare facilities, and even infrastructure such as cell towers and timberlands. By pooling capital from many investors, REITs allow individuals to invest in large-scale real estate portfolios that would otherwise be inaccessible to most people.
One of the defining characteristics is their unique tax structure. To qualify as a REIT under U.S. law, a company must distribute at least 90 percent of its taxable income to shareholders in the form of dividends. This requirement makes an attractive option for investors seeking steady income, particularly retirees and income-focused savers. In exchange, REITs generally do not pay corporate income tax on the earnings they distribute, helping to avoid double taxation.
REITs are also valued for their liquidity and transparency. Many REITs are publicly traded on major stock exchanges, allowing investors to buy and sell shares as easily as stocks, unlike traditional real estate investments that can be illiquid and time-consuming to transact. Public REITs are subject to strict reporting and governance standards, providing investors with regular financial disclosures and increased visibility into operations.
Over time, REITs have demonstrated the ability to deliver competitive long-term returns while offering diversification benefits. Because real estate often behaves differently than stocks and bonds, REITs can help reduce overall portfolio volatility. As inflation rises, rental income and property values may also increase, allowing REITs to serve as a potential hedge against inflation.
Together, these features make REITs a powerful and accessible vehicle for long-term wealth building, income generation, and participation in the real estate market.
