How do REITs work?

REITs or Real Estate Investment Trusts work by pooling funds from multiple investors to purchase and manage incomegenerating real estate properties such as apartment buildings, office complexes, hotels, shopping malls, and industrial warehouses. The income generated from these properties is distributed to investors in the form of dividends.

REITs are required by law to distribute at least 90% of their taxable income as dividends to shareholders, which makes them a popular choice for incomeseeking investors. Additionally, because REITs are publicly traded on stock exchanges, investors can easily buy and sell REIT shares just like stocks, providing liquidity to their investments.

REITs are governed by special tax rules, which allow them to avoid paying federal income tax at the corporate level, as long as they distribute at least 90% of their taxable income to shareholders in the form of dividends. This makes REITs an efficient way for investors to invest in real estate properties without the hassle and expense of managing the properties themselves.