What is an REIT or Real Estate Investment Trust?

Answer:
A Real Estate Investment Trust, or REIT,

is a security that invests in real estate directly through mortgages or property transactions. REITs sell like stocks on the major exchanges yet they invest in the real estate market.

You can buy REIT shares on an open exchange or you can go the mutual fund route and invest in a mutual fund that specializes in real estate investment trusts.

Buying REITs allows shareholders to enjoy investing in real estate without having to go out and “flip” houses. A REIT can be a high-yield, liquid investment that allows you to invest in the real estate market.

REITs come in different forms. An equity REIT purchases and owns properties with revenues coming from rents. Mortgage REITs loan money to the real estate owners with revenues coming mainly from interest earned on the loans. A hybrid REIT takes both strategies and invests in both real estate property and mortgages.

Advantages of owning REITs include special tax considerations, high yields, liquidity, and (in some cases) the ability to reinvest dividends through a Dividend ReInvestment Plan (DRIP).