What is a REIT?

Due to the large costs involved, purchasing and managing commercial real estate, such as office buildings and shopping centres, is beyond the means of most individuals. Real Estate Investment Trusts (REITs) are entities that own, and in many cases manage and develop real estate and consequently the majority of their income is derived from rents. The vehicles are owned by a range of investors and, hence, the underlying real estate is said to be securitised. The REIT is required to distribute the majority of the taxable income derived from the real estate and is limited in the range of non-rental related activities in which it may actively participate. These entities are listed on leading stock exchanges and give investors access to real estate that otherwise may be inaccessible to investors due to the large costs involved.