What is a REIT?
A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of real estate, ranging from office space and apartment buildings to warehouses, hospitals, shopping centers, hotels, etc. Most REITs have a straightforward business model: the REIT leases space and collects rents on the properties, then distributes that income as dividends to investors.
Types of REITs
REITs can be further classified based on how their shares are bought and held:
- Publicly Traded REITs. Shares of publicly-traded REITs are listed on a national securities exchange, where they are bought and sold by individual investors. They are regulated by the U.S. Securities and Exchange Commission (SEC).
- Private REITs. These REITs aren’t registered with the SEC and don’t trade on national securities exchanges. In general, private REITs can be sold only to institutional investors.
- Public Non-Traded REITs. These REITs are also registered with the SEC but don’t trade on national securities exchanges. As a result, they are less liquid than publicly-traded REITs. Still, they tend to be more stable because they’re not subject to market fluctuations. The DiversyFund Growth REIT is a public non-traded REIT.