Financial Dictionary -> Mortgages -> REIT

REIT is the abbreviation of the Real Estate Investment Trust, which is a method of investing in real estate in the same way you would invest in stock, on the major stock exchanges. By investing in a REIT you are investing in an investment of properties or sometimes mortgages. You can also invest in REITs through a real estate specific mutual fund. REITS can also be privately held.

The REIT itself is a company that owns a lot of real estate that earns them the majority of their income from the properties.

Investing in a Real Estate Investment Trust offers several tax benefits and they can decrease or completely wipe out any corporate incomes tax associated with other investments. It was designed this way to offer a comparable way of investing in real estate to that of ordinary mutual funds and stock. It eliminates the hassle and research of investing in real estate the traditional way and basically just deals with the facts and figures needed to determine if the investment is worth it.

There are several types of REIT, including Equity REITS, which invest in regular properties, Mortgage REITs, which invest in mortgages and make the profit from the interest paid on mortgages, and Hybrid REITS, which invest in several combinations of the above.

When investing in REITS, the main things to look out for are the Net Asset Value (NAV), Adjusted Funds From Operations (AFFO), and the Cash Available for Distribution (CAD).

A Real Estate Investment Trust is not limited to houses. They can be attached to offices, stores, apartment complexes, hotels and virtually any other type of building that can be invested in.

With the 2008 downturn in the economy and real estate market, Real Estate Investment Trusts have seen a 40 to 70 percent drop off.