What is a real estate investment trust (REIT)?

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

REITs typically invest in various types of properties, such as apartments, office buildings, shopping malls, and hotels, and they generate revenue predominantly through leasing space and collecting rents on the properties they own. This structure not only provides liquidity, as shares in the REIT can often be traded on a stock exchange, but it also offers the benefit of diversification by pooling investor capital to invest in a broader range of properties than an individual investor might be able to afford on their own.

In contrast, cooperative housing arrangements involve a different structure focused on member ownership and tangible living spaces, which is distinct from the investment model of a REIT. Similarly, government housing programs typically involve public agencies and social housing initiatives rather than investment in real estate for profit. Lastly, a personal property investment strategy relates more to direct ownership of individual assets rather than the collective investment model that REITs utilize. Thus, the definition of a REIT is best represented by its role as a financing entity focused on