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

A real estate investment trust, or REIT, is defined as a company that owns, operates, or finances income-producing real estate. This structure allows individuals to invest in large-scale, income-producing real estate without having to buy and manage properties directly.

REITs pool capital from multiple investors to purchase real estate assets such as office buildings, shopping malls, apartments, and hotels, among others. By doing this, they not only provide a way for individual investors to earn a share of the income produced through commercial real estate investment but also offer a more diversified investment opportunity. REITs typically operate under the requirement to distribute a significant portion of their taxable income to shareholders in the form of dividends, which can provide a reliable income stream for investors.

This concept is vital in the real estate market, as it democratizes access to real estate investment, allowing smaller investors to participate in the market without the challenges of direct management and ownership.