Real Estate, the Easy Way

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By Selena Maranjian (TMF Selena)
October 28, 2002

Q. What are REITs?

A. Real Estate Investment Trusts (most commonly known as REITs) are companies that acquire or finance all kinds of real estate, such as offices, hotels, or apartments. They are professionally managed and diversified, holding many properties. Many REITs are publicly traded, which means you can find their stocks listed on the major stock exchanges.

REITs are unique in many ways. For starters, corporations or trusts that qualify as REITs generally don't pay corporate income tax and are often exempt from state income tax as well. They're required to invest at least 75% of their assets in real estate and pay out 95% of their income as dividends. In good years, REIT dividends can run quite high, topping 10%.

The popularity of REITs has increased in recent years, as people have discovered this way to invest in real estate without actually buying a hotel or office complex.

You can learn more about REITs in Fooldom in this article and this one. Also, check out NAREIT.org and REITnet.com and this book: Investing in REITs: Real Estate Investment Trusts by Ralph L. Block. You'll probably run across the author, Mr. Block, on our Real Estate & REITs discussion board.

If you have any questions, thoughts or opinions on this column, share them with others on our Ask the Fool discussion board.

This question and answer is adapted from The Motley Fool Money Guide: Answers to Your Questions About Saving, Spending and Investing. For answers to this and 499 other common money questions, check it out -- it's a handy resource.