Real Estate Investment Trust (REIT)

Define REIT in Simple Terms

A Real Estate Investment Trust, or REIT, is a company that is set up like a mutual fund to offer real estate investment opportunities to a wide range of investors.

In a REIT, the company owns and operates some income producing real estate.

A pool of investors contribute funds to the REIT to finance purchases and operations in return for a portion of the income.

REIT Investing

Congress established REITs in 1960 as part of the Cigar Excise Tax Extension.

Before the creation of REITs, traditional real estate investors had to purchase and operate an entire property on their own, making it an investment opportunity only available to wealthy individuals.

Modern REITs allow investors to invest a small amount of money to finance a property along with other investors, opening up real estate as a viable option for those without the time or funds to own and operate property by themselves.

REIT Example

REIT portfolios can be composed of a variety of properties, including apartment complexes, warehouses, healthcare facilities, and infrastructure such as cell towers and energy pipelines.

Most REITs specialize in a particular sector of real estate, however some diversified REIT portfolios may consist of a variety of different real estate types.

Real Estate Investment Trust (REIT) Definition FAQs

REIT stands for Real Estate Investment Trust.
A Real Estate Investment Trust, or REIT, is a company that is set up like a mutual fund to offer real estate investment opportunities to a wide range of investors.
A pool of investors contributes funds to the REIT to finance purchases and operations in return for a portion of the income.
Modern REITs allow investors to invest a small amount of money to finance a property along with other investors, opening up real estate as a viable option for those without the time or funds to own and operate property by themselves.
REIT portfolios can be composed of a variety of properties, including residential, commercial, apartment complexes, warehouses, healthcare facilities, and infrastructure such as cell towers and energy pipelines.
True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.