What is a REIT? A plain-English guide

You've probably wished you could own a slice of real estate without a deposit, a mortgage, or a leaky roof to fix at 2am. A REIT lets you do exactly that. Let's explain it in the plainest words possible.

REIT stands for real estate investment trust. Say it “reet.” Strip away the jargon and it means one thing: a company that owns buildings and lets you buy a tiny share of them.

The landlord idea, shared out

A REIT owns property — apartments, shopping centers, warehouses, hospitals, cell towers. It rents that property out and collects the rent. When you buy a share of the REIT, you own a tiny slice of all those buildings, and a tiny slice of the rent they bring in.

So instead of being a landlord with one flat, you become a part owner of hundreds of buildings — with none of the phone calls about a broken boiler.

Why people like REITs

By law, a REIT has to pay out most of its rental profit to shareholders. That means it tends to send you regular cash, a bit like a dividend. And you can buy or sell a REIT share any market day, just like a stock — far easier than selling an actual building.

The honest catch

REITs are still investments, so they rise and fall. When property prices or rents drop, so does the REIT. They can also be sensitive to interest rates. A REIT is not a savings account — it's a way to own real estate's ups as well as its downs.

The takeaway

A REIT is a company that owns buildings and lets you buy a small share of them, collecting a slice of the rent and trading as easily as a stock. It's the simplest way for most people to add real estate to a mix — once you've freed up the money to buy it.