REIT
A REIT is a company that owns or finances income-producing real estate and must pay out at least 90% of taxable income to shareholders as dividends.
Definition
A real estate investment trust (REIT) is a company that owns, operates, or finances income-producing real estate and lets investors buy into a diversified property portfolio much like buying stock. To qualify, a REIT must distribute at least 90% of its taxable income to shareholders as dividends and meet asset and income tests focused on real estate.
In return, the REIT itself generally pays no corporate income tax, avoiding the double taxation most corporations face. REITs come in several forms: publicly traded (liquid, priced daily on an exchange), public non-traded, and private. They can own apartments, offices, retail, industrial, data centers, and more.
REITs matter to 1031 investors mainly through the 721 exchange, or UPREIT, path: an investor can contribute property, often via a DST first, to a REIT's operating partnership for OP units, gaining diversified, professionally managed exposure while deferring tax. The trade-off is giving up direct property ownership.
Key points
- Owns or finances income-producing real estate
- Must distribute at least 90% of taxable income as dividends
- Generally pays no corporate-level income tax
- Reached by 1031 investors through the 721/UPREIT path
Related terms
Jerry Baker founded Baker 1031 Investments to help exchange investors move from active property ownership into passive, institutional-quality real estate through DST, 721 exchange, mineral royalty, and Opportunity Zone strategies. He holds the FINRA Series 22 and Series 63 registrations and the Securities Industry Essentials (SIE) qualification. Read full bio →
Reviewed by the Aurora Securities, Inc. compliance team — Aurora Securities, Inc., member FINRA/SIPC. Last reviewed July 2026. Securities are offered through Aurora Securities, Inc.; Baker 1031 Investments, LLC is independent of Aurora Securities, Inc.
This glossary entry is educational and is not investment, tax, or legal advice, or an offer to sell or a solicitation to buy any security. Definitions are general and may not reflect your specific circumstances — consult your own CPA and attorney. Past performance does not guarantee future results.