REIT stands for Real Estate Investment Trust.

A REIT is a company that owns and generally manages real estate property such as apartments, offices, and industrial complexes.

To qualify as a REIT a company must:

• have at least 75% of its total assets in real estate.
• pay at least 90% of its taxable income to its shareholders through dividends.
• have at least 100 shareholders.
• have at least 75% of its income generated from real estate

REITs were established in 1960 and operate under Subchapter M, subject to revisions from RIETSA in the US. This legislation provides REIT companies with special tax breaks that allow them to avoid paying corporate taxes as long as almost all of the income generated is distributed to it's investors. Although the REIT structure avoids double taxation to its shareholders, tax losses cannot be passed through.

There are three types of REITs as defined by the SEC:

• Equity REITS: the most common type of REIT, invest in or own real estate and make money for investors from the rents they collect;
• Mortgage REITS: lend money to owners and developers or invest in financial instruments secured by mortgages on real estate; and
• Hybrid REITS: are a combination of equity and mortgage REITS.