What are Real Estate Investment Trust (REITs)?

A real estate investment trust (or “REIT”) is a company dedicated to owning, and in most cases, operating income-producing real estate, such as apartments, shopping centers, offices and warehouses. Some REITs also engage in financing real estate. Created in 1960 by the U.S. Congress, REITs allow individuals and institutions to invest in property without the problems associated with owning actual bricks and mortar. It is a collective investment system in which investors’ money is pooled into a trust to invest in property shares in much the same way that a mutual fund invests in stocks.

REITs are involved with most types of property: shopping malls, cinemas, industrial buildings, prisons and golf courses. It is a good way of allowing investors to get a return from property investment without the day-to-day worries of owning property. The trust invests in buildings which are then leased and the profits go back into the trust; some investment trusts even finance the construction of real estate.

Most REITs are equity trusts that deal in hard property, and can be either publicly- traded on stock exchanges or publicly-offered but not traded on any exchanges or privately-offered.