What REITs Are and Why Investors Use Them

This lesson introduces real estate investment trusts, or REITs, as publicly accessible investment vehicles that own, operate, or finance income-producing real estate. Students will learn the basic structure of a REIT, the difference between owning property directly and owning shares in a REIT, and why REITs are commonly used for income, diversification, liquidity, and real estate exposure.

The lesson also sets realistic expectations. REITs are not guaranteed-income products, bond substitutes, or simple proxies for home prices. Their returns depend on property cash flows, management decisions, interest rates, leverage, tenant demand, and market pricing. By the end, students should understand what a REIT is, what problem it solves for investors, and what questions to ask before using REITs in a portfolio.