REITs are real estate investment trusts -- organizations that combine the capital of many investors to acquire or finance all kinds of real estate, such as offices, hotels, shopping centers, or apartments. A REIT is a little like a mutual fund. Its portfolio is professionally managed and diversified, and it holds many properties. REITs typically trade on 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, too. 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 even 10%. This has led Income Investor advisor Mathew Emmert to pick a few classic REITs for his newsletter service. You can read all about his recommendations and subsequent updates by trying out a 30-day guest pass.

The popularity of REITs has increased in recent years, as people have discovered this method of investing in real estate without actually buying any. You can learn more about REITs in Fooldom by reading two classicarticles. You can also check out the book Investing in REITs: Real Estate Investment Trusts by Ralph L. Block, whom you may just run across on our Real Estate and REITs discussion board.