What is a Real Estate Investment Trust (REIT)?

A Real Estate Investment Trust (REIT) is fundamentally characterized as a private or public organization that primarily invests in commercial real estate. The key feature of a REIT is its structure, which allows it to pool capital from many investors in order to purchase, manage, and sell income-producing real estate. This structure offers a way for individual investors to earn a share of the income produced through real estate ownership without having to buy, manage, or finance any properties themselves.

REITs are designed to provide a steady income stream for investors, often in the form of dividends, as they are mandated to distribute a significant portion of their taxable income to shareholders. They typically invest in various types of income-generating properties, such as office buildings, shopping malls, apartments, and hotels, which distinguishes them from investments that focus solely on residential real estate or from other investment vehicles.

This option accurately reflects the essence of what REITs are and demonstrates their role in the commercial real estate market, making it the correct choice.