InvestorQ : Can you explain the concept of a real estate investment trust (REIT)?
Priyanka Singh made post

Can you explain the concept of a real estate investment trust (REIT)?

Answer
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Samita Patil answered.
1 year ago


A real estate investment trust (REIT) is a company that buys real estate to generate regular and lucrative returns for its investors. Through REITs, small investors can invest in the otherwise expensive realty market.

The real estate a REIT purchases include corporate offices, warehouses, shopping malls, and apartment complexes, etc.

REITs are similar to mutual funds. Like a fund manager purchases select stocks in a mutual fund scheme to make investors’ money grow, similarly, REITs invest money in income-generating real estate.

A REIT is required to pay out at least 90% of its taxable income as dividends.

As these dividends are the taxable part of the income generated by the REIT-owned properties, the company is able to pass its tax burden to shareholders rather than pay taxes itself.