What is a Real Estate Investment Trust (REIT) and the Benefits of Its Structure

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-generating real estate across various sectors. These sectors include residential, commercial, and industrial properties.

REITs offer a unique investment structure that combines the benefits of real estate ownership with the convenience of stock market investment. By purchasing shares in a REIT, investors gain exposure to real estate portfolios without having to directly buy or manage properties.

One of the primary benefits of investing in REITs is the liquidity they provide. Unlike traditional real estate investments, which may require significant time and expense to sell or transfer, REIT shares can be easily bought and sold on major stock exchanges.

This feature offers investors flexibility and access to cash when needed.

Furthermore, REITs often distribute a significant portion of their taxable income as dividends, providing a regular income stream for shareholders.

The structure of REITs also offers favorable tax advantages. They are required to pay out at least 90% of their taxable income as dividends to maintain their tax-advantaged status.

This requirement allows investors to potentially benefit from higher dividend yields compared to other types of investments.