What Is a REIT and How Does It Work?
A Real Estate Investment Trust (REIT) is a company that owns and typically operates income-producing real estate. Congress created REITs in 1960 to allow ordinary investors to invest in large-scale commercial real estate the same way they invest in stocks. By law, REITs must meet strict requirements: invest at least 75% of total assets in real estate, derive at least 75% of gross income from rents, mortgage interest, or property sales, and distribute at least 90% of taxable income to shareholders as dividends annually. This mandatory payout structure means REITs pay higher dividends than most stocks — historically 3–6% annual dividend yields. REITs invest across many property types: Equity REITs own and operate properties (apartments, offices, retail, industrial warehouses, hotels, data centers, healthcare facilities). Mortgage REITs (mREITs) lend money to real estate owners or invest in mortgage-backed securities — higher yield but more volatile. Hybrid REITs combine both. The largest REIT sectors by market cap are industrial (Amazon warehouses, logistics), residential apartments, healthcare (hospitals, senior housing), and retail. REITs trade on stock exchanges like any stock — investors can buy and sell shares through any brokerage account with no minimum purchase above one share price.