Definition
A company that owns income-producing real estate and pays out most of its profits as dividends. REIT index funds add real estate exposure without buying property.
Why it matters
REITs deliver real estate's income and diversification without tenants, toilets, or a down payment. Because they must distribute at least 90% of taxable income, they suit tax-advantaged accounts best.
Example
Instead of a rental property, an investor puts $10,000 into a REIT index fund inside a Roth IRA, collecting dividend income from thousands of properties with zero landlord duties and no tax drag on the payouts.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.