reit
Real Estate Investment Trust — a company that owns income-producing real estate, allowing investors to earn dividends from real estate without buying property.
Example
“She bought shares in a REIT to get exposure to commercial real estate without buying a property.”
Memory Tip
REIT — Real Estate In Trust. A trust holds real estate on your behalf.
Why It Matters
REITs allow everyday investors to build real estate exposure in their investment portfolio without the large capital requirement of buying physical property. They provide regular dividend income and potential capital appreciation, making real estate investment accessible through a simple stock purchase.
Common Misconception
Many people believe REITs are only for wealthy investors or that they work identically to owning actual property. In reality, REITs are traded like stocks and do not give you direct control over properties or the ability to leverage them for loans like you would with direct real estate ownership.
In Practice
Suppose you have $5,000 to invest and buy shares of an apartment REIT yielding 4 percent annually. You would receive roughly $200 per year in dividends without managing tenants or maintenance, whereas buying an actual apartment would require $50,000 to $100,000 down payment plus ongoing property management responsibilities.
Etymology
Acronym for Real Estate Investment Trust — created by US Congress in 1960.
Common Misspellings
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