What Is a REIT?

A REIT (real estate investment trust) is a company that owns, and usually operates, income-producing property such as offices, apartments, warehouses or data centers. US REITs must pay out at least 90% of their taxable income as dividends, which is why their yields are high.

Types of REITs

Equity REITs own buildings and earn rent; they are most of the market. Mortgage REITs own property loans and mortgage securities and earn the interest; they often yield far more and carry more risk.

REITs specialise: industrial and logistics, residential, retail, office, healthcare, data centers, cell towers, self-storage. Each follows its own property cycle.

What to watch

Because REITs pay out most of their income, they borrow and issue shares to grow, so interest rates matter: rising rates raise their costs and make their yields less attractive next to bonds.

Earnings per share understate a REIT’s cash flow because of property depreciation, so REITs report funds from operations (FFO) instead.

Put it to use

The real estate sector →Dividend stocks →

General information, not investment advice.