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

A real estate investment trust (REIT) is a company that primarily engages in owning, operating, or financing income-generating real estate. This form of investment allows individuals to invest in large-scale commercial properties without having to buy or manage the properties directly. REITs typically generate income through leasing space and collecting rents on the properties they own, and they are often required by laws to distribute a significant portion of their taxable income to shareholders in the form of dividends.

This structure makes REITs appealing to investors looking for a way to earn a steady income stream and diversify their investment portfolio through real estate, which can also offer potential for capital appreciation. By pooling funds from multiple investors, REITs can purchase and manage properties that may be out of reach for individual investors.

The other options reflect different aspects of real estate but do not accurately define what a REIT is. For instance, selling residential properties relates to real estate brokerage but does not involve leasing or owning; a government entity regulating transactions pertains to oversight and compliance, and a specific type of mortgage references loan products rather than investment structures.