Learn About REIT Basics

Modeled after mutual funds, REITs historically have provided investors of all types regular income streams, diversification and long-term capital appreciation. Investors can purchase stock in equity REITs and mortgage REITs. Equity REITs own properties in a variety of real estate sectors, such as retail, office and residential.

What's a REIT?

A REIT (pronounced REET), or real estate investment trust, is a company that owns, operates or finances income-producing real estate. Modeled after mutual funds, REITs historically have provided investors of all types regular income streams, diversification and long-term capital appreciation.

70 million
An estimated 70 million Americans own REITs through their retirement savings and other investment funds.
$60 billion
Stock exchange-listed REITs paid out approximately $60.1 billion in dividends during 2016.
$1 trillion
U.S. REITS have an equity market capitalization of more than $1 trillion.

Why Invest?

REITs historically have delivered competitive total returns, based on high, steady dividend income and long-term capital appreciation. Their comparatively low correlation with other assets also makes them an excellent portfolio diversifier that can help reduce overall portfolio risk and increase returns. These are the characteristics of REIT-based real estate investment.

Liquidity
REITs have historically provided:
  • Ability to buy/sell like other stocks, mutual funds and ETFs.
  • Opportunities for tactical asset allocation.
  • Easy portfolio rebalancing.
Diversification
REITs have historically provided:
  • Low correlation with other stocks and bonds.
  • Higher risk-adjusted returns.
  • An investment in real, tangible assets.
Transparency
REITs have historically provided:
  • Corporate governance aligned with shareholders interests.
  • Audited financial reports.
Dividends
REITs have historically provided:
  • Dividends & wealth accumulation.
  • Regular income from rents.
  • Reduced portfolio volatility.
Performance
REITs have historically provided:
  • Total returns above the S&P 500 over the past 25 years.
  • Higher returns than corporate bonds.

Types of REITS

Most REITs are traded on major stock exchanges, but there are also public non-listed and private REITs. The two main types of REITs are equity REITs and mortgage REITs commonly known as mREITs.

  • Equity REITs – a company that owns or operates income-producing real estate.
  • Mortgage REITs – mREITs provide financing for income-producing real estate by purchasing or originating mortgages and mortgage-backed securities and earning income from the interest on these investments.
  • Public Non-listed REITs – PNLRs are registered with the SEC but do not trade on national stock exchanges.
  • Private REITs – Private REITs are offerings that are exempt from SEC registration and whose shares do not trade on national stock exchanges.

REIT Sectors

REITs invest in the majority of real estate property types, including offices, apartment buildings, warehouses, retail centers, medical facilities, data centers, cell towers, infrastructure and hotels. Most REITs focus on a particular property type, but some hold multiples types of properties in their portfolios.

Notable REIT-Owned Properties

How to Invest?

Individuals can invest in REITs in a variety of different ways, including purchasing shares of publicly traded REIT stocks, mutual funds and exchange-traded funds.

An individual may buy shares in a REIT, which is listed on major stock exchanges, just like any other public stock. Investors may also purchase shares in a REIT mutual fund or exchange-traded fund (ETF). 

A broker, investment advisor or financial planner can help analyze an investor’s financial objectives and recommend appropriate REIT investments.

Investors also have the ability to invest in public non-listed REITs and private REITs. 

The information on this Site is for informational purposes only and the Site is not intended to be a solicitation related to any particular company, nor does Nareit intend to provide investment, financial, legal or tax advice. More...