What benefit does a real estate investment trust (REIT) offer to investors?

A Real Estate Investment Trust (REIT) primarily offers investors the benefit of dividend income from property investments. This structure allows individuals to invest in large-scale, income-producing real estate without having to directly purchase or manage properties themselves.

REITs collect rental income from a diversified portfolio of properties, and they are mandated by law to distribute a significant portion of their income (often around 90%) to shareholders in the form of dividends. This makes REITs an attractive option for investors seeking regular income, particularly in the form of dividends, which can be a stable source of cash flow.

The notion that a REIT is about owning physical properties is misleading, as investors do not hold direct ownership of the properties involved; rather, they buy shares of the REIT. This distinction sets REITs apart from direct property ownership. Additionally, REIT shareholders do not have exclusive rights to sell properties; rather, the REIT itself is managed by professionals who handle property transactions. Tax exemptions on property sales may not directly apply to individual investors as they would typically be responsible for taxes on their dividends received, hence reinforcement of the primary feature which is dividend income.