Real estate investment trust

A company that owns, and usually operates, income-producing property and pays no corporate income tax provided it distributes most of its taxable income. Equity REITs own property; mortgage REITs hold property loans.

Where you will meet it

Real estate investment trust appears in 8 learning outcomes on the CFA syllabus. A few of them:

• Set out the different ways to invest in real estate
  CFA Level I · Alternative Investments

  “REITs give public equity exposure with the liquidity of listed shares, though their prices tend to move with equity markets in the short run even while tracking property values over longer horizons.”

• Discuss the kinds of real estate securities that trade publicly
  CFA Level II · Alternative Investments

  “Real estate investment trusts own, and usually operate, income-producing property and avoid corporate income tax on income they pay out, provided they distribute most of their taxable income, at least 90% under US rules, with other countries setting their own, and meet tests on assets and income.”

• Weigh risk and return across private property strategies and against other assets in a strategic allocation
  CFA Level III · Private Markets Pathway

  “Private property looks less volatile than REITs because appraisals smooth it, but the two tend to converge over long horizons.”

• Contrast REITs with owning property directly
  CFA Level I · Alternative Investments

  “A REIT gives daily liquidity, professional management, diversification across many properties and a small minimum investment, at the cost of market-price volatility that often tracks equities more closely than property values do.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with R · Glossary