What is the purpose of a Real Estate Investment Trust (REIT)?

A Real Estate Investment Trust (REIT) serves a specific purpose in the investment landscape. Its primary aim is to allow individual investors to pool their resources to invest in large-scale, income-producing real estate. By doing so, REITs provide a way for investors to gain access to a diversified portfolio of properties, which would typically be difficult for a single individual to acquire. This pooled investment model enables smaller investors to benefit from the growth and cash flow of real estate without having to directly own and manage properties themselves.

REITs can invest in various types of real estate, including commercial buildings, residential complexes, and industrial properties, and they typically generate revenue through rental income, which is then distributed to investors in the form of dividends. This structure not only democratizes access to real estate investments but also offers liquidity, as shares of publicly traded REITs can be bought and sold on major stock exchanges, unlike traditional real estate assets.

Other options describe activities that do not align with the core function of a REIT. For example, while some REITs may invest in distressed properties, renovation is not their defining characteristic. Similarly, REITs do not provide tax incentives directly to home buyers or manage rental properties in a residential landlord capacity, as