REITs are companies that own or finance real estate assets. Shares of public REITs trade on stock exchanges, making it simple for anyone to invest in portfolios of real estate properties.
Some REITs specialize in every category of real estate property, residential and commercial. Many focus on a single type of property—retail, offices, apartments, medical, data centers—while some own a range of different types of properties.
These specialized companies get preferential tax treatment to help finance their operations and are also required to pay out 90% of their taxable income to shareholders in the form of dividends. As a result, REITs are a favorite of income investors.
They have typically performed well during periods of rising inflation and higher interest rates. According to the National Association of REITs (Nareit), the voice of the REIT industry, the average four-quarter return during rising interest rate periods is 16.55%, compared with 10.68% in non-rising rate periods.
