What is a real estate investment trust (REIT)?

A real estate investment trust (REIT) is a company that allows individuals to invest in income-producing real estate without having to buy or manage the properties directly. REITs operate by pooling the capital of many investors to purchase, operate, or finance income-generating real estate across a range of property sectors, such as residential, commercial, or industrial properties.

Investors benefit from REITs through dividends that come from the net income generated by the properties within the trust, making real estate investment accessible to those who may not have the means to invest in physical real estate on their own. Additionally, REITs are typically traded on major stock exchanges, providing liquidity similar to other publicly traded companies.

The other options describe different entities or products but do not accurately represent the function of a REIT. A government body overseeing real estate transactions relates more to regulatory functions rather than investment opportunities. A mutual fund investing in various industries does not specifically focus on real estate and is broader in scope. A personal loan for purchasing properties speaks to financing property purchases, rather than an investment vehicle. Thus, the correct answer highlights the unique role REITs play in enabling investment in real estate.