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Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallREITs are companies that own or operate income-producing real estate or invest in real-estate-related assets, such as mortgages. You can invest through exchange-listed REIT shares bought with a broker, or through REIT mutual funds and ETFs; non-traded and private REITs have different liquidity, disclosure, and valuation risks. Before investing, compare the structure, assets, fees, risks, and your own need for access to your money.
What are REITs?
A real estate investment trust, or REIT, is a company that owns or operates income-producing real estate or holds real-estate-related assets. Its holdings may include apartments, offices, shopping centers, hotels, self-storage facilities, warehouses, mortgages, or loans. Some REITs specialize in one property category.
Equity REITs own or operate properties and generally earn income from rents. Mortgage REITs invest in mortgages or other real-estate-related debt and earn income from those investments. REITs let investors gain exposure to real estate through securities or funds instead of buying and managing property directly, but they are not interchangeable: their assets, risks, and trading access vary.
How REITs work and what the 90% rule means
U.S. REITs must meet tax qualification requirements. Under the general rule in the Internal Revenue Service’s Instructions for Form 1120-REIT (2025), the dividends-paid deduction must generally equal or exceed 90% of REIT taxable income, subject to statutory exclusions and adjustments. This is a qualification threshold, not a promised dividend yield or investment return, and it does not mean every distribution comes solely from current operating earnings.
REIT distributions are not guaranteed. A REIT’s ability to pay distributions depends on its business and financing, and investors should examine the source and sustainability of distributions rather than judging by a headline yield alone. The SEC says REIT dividends typically do not qualify for the favorable tax treatment accorded to qualified dividends and are generally treated as ordinary income; individual tax results depend on circumstances.
Ways to invest in REITs
| Structure | Trading and transparency | Key considerations |
|---|---|---|
| Publicly traded REIT | Listed on a national securities exchange; market prices are available, and shares are generally more readily bought and sold. | Shares can fluctuate in price. Consider property, financing, sector, and management risks, and review filings and risk factors. |
| Non-traded REIT | Registered with the SEC but not exchange-listed; there is no continuously available exchange price. | SEC materials warn of illiquidity, uncertain or infrequent valuations, redemption restrictions, fees, possible conflicts, and distributions that may be funded from offering proceeds or borrowing. Review the current offering documents. |
| Private REIT | Not publicly listed; regular SEC reporting may not be available. | Valuation and resale can be difficult, and investor eligibility and disclosures differ. Verify the offering documents and the status of anyone selling it. |
According to the SEC, investors can buy publicly traded REIT shares through a broker. REIT-focused mutual funds and exchange-traded funds (ETFs) are alternatives that may provide exposure across multiple holdings. Non-traded REITs are generally purchased through a broker participating in the offering; private offerings may be limited to accredited investors. Compare liquidity, valuation transparency, fees, disclosure, eligibility, and underlying assets—not headline yields alone.
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How to research a REIT before investing
- Identify what it owns. Understand its property or debt sector and the risks specific to that business.
- Read its disclosures. Review the latest annual and quarterly reports, prospectus, and risk factors through SEC EDGAR. For non-traded or private offerings, carefully read the current offering documents.
- Consider financing and interest rates. Rate changes can affect REITs through rents, borrowing and acquisition costs, and the appeal of dividend yields. For mortgage REITs, examine leverage and hedging as well as the issuer’s current risk disclosures.
- Review management, fees, and conflicts. Check whether an external manager or affiliated entities receive fees that could create conflicts of interest.
- Assess distributions and total return. Do not focus solely on a stated distribution. Consider where distributions come from and the REIT’s business and risk disclosures, especially for non-traded REITs.
- Match the investment to your circumstances. Consider your goals, liquidity needs, risk tolerance, fees, and tax situation. The SEC advises investors to conduct thorough research and consult an investment professional as appropriate.
FAQ
How do I buy shares in a publicly traded REIT?
The SEC says publicly traded REIT shares can be bought and sold through a broker. REIT mutual funds and ETFs are also ways to obtain exposure to multiple REIT holdings.
Are REIT dividends guaranteed?
No. REIT distributions are not guaranteed, and the 90% tax qualification rule is not a promised yield. Review the REIT’s disclosures and the source and sustainability of its distributions.
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Are non-traded REITs easy to sell?
Not necessarily. They are not exchange-listed, may have limited redemption opportunities, and can be difficult to value or resell. Check the current offering documents for restrictions, fees, valuation practices, and distribution sources.
How are REIT dividends taxed?
The SEC says REIT dividends typically do not qualify for the favorable tax treatment accorded to qualified dividends and are generally treated as ordinary income. Your tax treatment depends on your circumstances and the applicable tax rules; consult a tax professional for personal guidance.
What should I compare before investing?
Compare the REIT’s assets and sector, trading access, valuation transparency, disclosures, fees, management, financing risks, distribution sources, and fit with your liquidity needs and risk tolerance. For a publicly traded REIT, the SEC recommends thorough research before making an investment decision.
Source: SEC Office of Investor Education and Advocacy, Investor Bulletin: Publicly Traded REITs; SEC, Real Estate Investment Trusts (REITs) and Investor Bulletin: Non-traded REITs; Internal Revenue Service, Instructions for Form 1120-REIT (2025).
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