What are the different REITs out there?

REITs are corporations that invest in properties, and there are different categories of REITs (real estate investment trusts). Equity REITs (EREITs) invest in income-producing real estate. They are not like developers, even though they purchase properties, such as malls, apartments and office buildings. EREITS purchase real estate as part of their portfolio, and not for resale. They are a good long-term investment, because they have both capital gains and income from rent, which earns dividends. Mortgage REITs (MREITs) differ in that they loan money for mortgages and purchase mortgages or mortgage-backed securities rather than investing in real estate. They earn dividends from interest payments. Some mortgage REITs invest in residential mortgages, others in commercial mortgages. Hybrid REITS invest in both property and mortgages, and their revenue comes from rents and interest.

REITs can be set up for a limited time, for a specific project, after which they are liquidated and the revenues distributed to the shareholders. There are other classifications of REITs based on how they can issue shares. A REIT can be closed-end, meaning that they can issue shares only once unless the shareholders agree to issue additional shares. Open-ended REITs are not limited in their ability to issue shares.


Another classification of REITs is based on how they can be purchased. They are divided into three categories, according to the National Association of Real Estate Investment Trusts (NAREIT). Private REITs are not registered with the Securities and Exchange Commission (SEC). Publicly traded REITs are registered with the SEC and are traded on the stock exchange. Investors can easily buy and sell them. A few REITS are registered with the SEC but are not publicly traded. The non-exchange traded REITs are offered to investors by private sponsors. They are marketed as fixed-income investments that are relatively stable, not subject to market fluctuations, and so are safer investments that offer good returns.