What is a Real Estate Investment Trust (REIT)?

A Real Estate Investment Trust (REIT) is specifically designed to allow individuals to invest in large-scale, income-producing real estate without having to buy, manage, or finance any properties directly. Essentially, a REIT is a company that invests in real estate and offers shares to investors, who then receive a portion of the income generated from those properties in the form of dividends. This structure enables various investors to gain exposure to the real estate market and benefit from its potential returns, plus it provides liquidity similar to that of a stock, since shares of REITs can be traded on major exchanges.

In contrast, other options describe entities that do not encompass the full purpose or function of a REIT. For instance, a company that exclusively owns commercial properties may resemble a REIT, but it lacks the specific characteristic of being a publicly traded entity that allows for diversified investment. A company managing mutual funds typically focuses on pooled investments in various securities, rather than directly in real estate assets. Lastly, a company providing mortgages to homeowners is primarily involved in the lending sector and does not relate directly to the investment aspect of real estate income through ownership as a REIT does. Therefore, the definition and function outlined in the chosen answer capture the essence of what a RE