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Investing

What is a REIT?

The meaning

A company that owns real estate like apartment buildings, office spaces, warehouses, and shopping centers, and lets regular people invest in it. When you buy a REIT, you’re getting a piece of real estate income without having to buy, own, or manage any actual property. By law, REITs have to pass most of their income along to their investors.

Example
  1. RentTenants pay the REIT
  2. CostsThe REIT pays its bills
  3. 90%+Of taxable income to you
On $5,000 at a 4% yield, that is about $200 a year in rent-based income.
Walk through the numbers

A REIT owns 200 apartment buildings. It collects rent, pays its costs and must pass at least 90% of its taxable income to shareholders. On $5,000 invested at a 4% yield, that is about $200 a year.

Why it matters

REITs let you earn rent income from many properties without being a landlord or saving for a down payment.

Read: Is Real Estate Investing Right for You? →Compare: REITs vs ETFs →

Related terms

Dividend yieldA year of dividends divided by the share price, shown as a percent.ETFA fund that holds many investments and trades like a single stock.DividendA cash payment a company or fund sends you for owning its shares.DiversificationSpreading your money across many investments so one bad one cannot sink you.

See all 34 terms · Read the full glossary

For education only and not personalized investment advice. Examples are hypothetical illustrations, not a prediction or a promise of results. All investing involves risk, including the possible loss of principal.