Real Estate Investment Trust (REIT)

What is a REIT?

A Real Estate Investment Trust, or REIT, is a pooled investment that invests primarily in income-producing real estate. The majority of REITs trade like stocks on the major exchanges, but there are other REITs that are available only in private markets. REIT investors earn a share of the income produced by the underlying properties – without actually having to go out and buy, manage or finance property themselves.

Are REITs a Good Investment?

Like all investments, REITs should be evaluated through the lens of an investor’s unique needs and tolerance for risk. REITs can be an effective tool for generating income in a portfolio and also have the potential to provide diversification benefits. A financial advisor can help to determine whether investing in REITs might be appropriate for a given investor.

REITs can invest in a variety of different types of real estate assets, and so it is important to consider the type of properties in the portfolio when comparing the performance of two or more different REITs. For example, the performance of a REIT dedicated to investing in retail properties (such as shopping malls) would likely produce different returns compared to a REIT invested primarily in warehouses or data centers.

How Does a REIT Work?

REITs generate returns for shareholders in two ways; income and capital appreciation. The income that a REIT generates is derived from the rent that is generated by the underlying properties in the portfolio, while capital appreciation occurs when the underlying properties increase in value. Of course, there is no guarantee that a REIT will be able to generate positive returns, and it is possible for the underlying properties to depreciate in value. The returns that REIT investors experience will be determined by the success of the underlying properties in the portfolio.

Types of REITs

Equity REITs

Equity REITs are the most common type of REIT.  They are publicly traded on an exchange just like a stock.  Investors can buy and sell shares on the open market, and pricing is typically available in real-time.

Mortgage REITs

Mortgage REITs provide financing for income-producing real estate by purchasing or originating mortgages and mortgage-backed securities and earning income from the interest on these investments.

Public Non-Listed REITs

Public, non-listed REITs (PNLRs) are registered with the SEC but do not trade on national stock exchanges.

Private REITs

Private REITs are offerings that are exempt from SEC registration and whose shares do not trade on national stock exchanges.  They are typically only available to very sophisticated investors.


Wealthspire Advisors is a registered investment adviser and subsidiary company of NFP Corp.
This information should not be construed as a recommendation, offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The commentary provided is for informational purposes only and should not be relied upon for accounting, legal, or tax advice. While the information is deemed reliable, Wealthspire Advisors cannot guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with regard to the results to be obtained from its use. ©2022 Wealthspire Advisors

Related Posts

retirement savings

A “How To” Guide to Retirement Savings for the Self-Employed

In the past, I’ve received calls from clients who had already retired but decided to get back into the game ...

Rule of 72 – Compound Interest

What Is Compound Interest? Compound interest is the interest on savings calculated on both the initial principal and the interest ...

certificate of deposit (cd)

Certificate of Deposit (CD)

What is a Certificate of Deposit? A certificate of deposit, or a CD, COD, or Time Account, is a savings ...