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Definition of a Real Estate Investmnet Trust (REIT)
A real estate investment trust is a corporation that combines the capital of many investors to acquire or provide financing for real estate, offers the benefits of a real estate portfolio under professional management, generally does not pay corporate federal income tax (allowing for nearly all of its income to be distributed to stockholders), and is required to pay distributions to investors of at least 90 percent of its taxable income.
REITs can be either publicly traded or non-traded, and may offer investment stability, diversification, and investor income. Non-traded REITs, are registered with the Securities and Exchange Commission (SEC), but do not publicly trade on a national stock exchange. These REITs behave similarly to direct ownership of real estate, and some investors see non-traded REIT shares as more stable than publicly traded REITs and stocks in general. This stability is largely due to the illiquid nature of this long-term investment.
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