A Real Estate Investment Trust (REIT) is a firm that holds or provides funding for revenue-generating assets, including apartments, shopping centers, office spaces, and warehouses. Additionally, REITs may invest in assets like air or water rights, unharvested crops, permanent structures, and structural components that are integral to a property but do not individually generate income.
Public REIT shares can be traded like stocks, enabling shareholders to participate in the real estate market. Most REITs can avoid paying income taxes if they distribute at least 90% of their earnings to shareholders. These earnings are disbursed to shareholders through various means. Rental income is typically categorized as ordinary income, while any profit generated from property sales is considered a capital gain.
