What is a real estate investment trust (REIT)?

A real estate investment trust (REIT) is a company that owns, operates, or finances income-producing real estate across a range of property sectors. By pooling capital from many investors, REITs provide a way for individuals to invest in large-scale, income-generating real estate without having to buy or manage properties directly.

REITs are designed to provide a high level of liquidity and offer investors a chance to earn a portion of the income produced through these properties, primarily in the form of dividends. They typically focus on commercial real estate such as apartment complexes, office buildings, shopping malls, and sometimes even healthcare facilities. This structure allows investors to take advantage of real estate markets that they might not be able to access on their own.

The other options do not accurately define what a REIT is. For example, a company that only finances residential properties is too narrow and does not encompass the broader spectrum of properties that a REIT might involve. A type of mortgage agreement refers to financial instruments rather than a company structure, while a government entity regulating real estate investments is unrelated to the operational model of how a REIT functions. Therefore, the answer identifying a REIT as a company that owns or finances income-producing real estate aptly captures its nature