What is a "real estate investment trust" (REIT)?

A real estate investment trust (REIT) is fundamentally a company that manages and invests in income-producing real estate. This structure allows investors to buy shares in a portfolio of real estate assets, similar to how they would invest in stocks or bonds. REITs typically own and operate income-generating properties such as residential apartments, commercial office buildings, shopping centers, and hotels, and they provide an opportunity for individual investors to earn a share of the income produced through real estate investment without having to buy, manage, or finance any properties directly.

The key characteristics of REITs include the requirement to distribute a significant percentage of their taxable income to shareholders in the form of dividends, thus providing a steady income stream to investors. This also gives REITs favorable tax treatment that allows capital to be efficiently raised for real estate investment while benefiting investors through liquidity and diversification of real estate exposure.

Other choices, like rental agreements or legal agreements for property leasing, pertain to very different aspects of real estate. They involve the terms and conditions under which a property might be rented or leased, rather than the investment structure that REITs represent. Additionally, tax incentives for home buyers relate to benefits aimed at individuals purchasing homes, which also do not capture the essence of