What is a real estate investment trust (REIT)?

A real estate investment trust (REIT) is defined as a company that owns, operates, or finances income-producing real estate. This structure allows individual investors to earn a share of the income produced through commercial real estate ownership without having to buy, manage, or finance any properties themselves.

REITs typically pool together investors’ funds to purchase and manage a diversified portfolio of real estate assets, such as apartment buildings, office buildings, hotels, and shopping centers. They are required to distribute at least 90% of their taxable income to shareholders in the form of dividends, making them a popular investment vehicle for those looking for income-generating opportunities in the real estate sector.

This definition emphasizes the essential function of REITs as facilitators of real estate investment and their role in generating returns based on the performance of their real estate holdings. Other choices do not accurately reflect what a REIT is, as they pertain to different financial instruments or investment strategies that do not involve direct ownership or management of real estate.