What is a "real estate investment trust" (REIT)?

A "real estate investment trust" (REIT) is recognized as a company that owns, operates, or finances income-producing real estate. This structure allows individual investors to earn a share of the income produced through real estate investment without having to buy, manage, or finance any properties themselves.

REITs often manage a portfolio of real estate properties, ranging from residential apartments to commercial office buildings, shopping centers, and hotels. They are required by law to distribute at least 90% of their taxable income to shareholders in the form of dividends, making them an attractive investment option for those seeking income. Investors in a REIT can benefit from the properties within the trust's portfolio, thus participating in the real estate market indirectly.

The other choices focus on investment mechanics unrelated to the specific function of a REIT. A company that invests solely in stocks does not pertain to real estate specifically. A company that provides loans may be involved in real estate financing, but it does not encompass the broad operations of owning and managing properties that define a REIT. Additionally, a company that strictly manages residential properties lacks the comprehensive scope of real estate investments, which typically includes a wider range of income-producing assets beyond residential units.