What Kind of REITs Are There?
Generally, there are six kinds of REITs:
Equity REITs. This is the most common form of REIT where the investment trust owns and manages a collection of real estate and derives revenue through rents or leases.
Mortgage REITs. This type of REIT uses cash liquidity to lend money to real estate owners and operators directly or indirectly through MBS. Revenue is derived from the net interest margin, or the difference between the interest gained from the loans and the cost of financing the loan. Due to the focus on mortgage financing, this type of REIT is sensitive to increases in interest rates.
Hybrid REITs. This type of REIT includes a mix of equity and mortgage-backed strategies. Some hybrids have a higher ratio of property to mortgage holdings, and vice versa, depending on the investment strategy of the REIT.
Publicly-Traded REITs. This type of REIT allows individual investors to purchase the listed REIT on national securities exchanges. Due to the publicly-traded nature, this type of REIT is regulated by the Securities and Exchange Commission (SEC).
Non-Traded REITs. This type of REIT is not traded on national securities exchanges. Therefore, these REITs are not regulated by the SEC and are not subjected to market fluctuations.
Private REITs. This type of REIT is only offered to a select group of investors. Private REITs are not traded on national securities exchanges and therefore are not required to be registered with the SEC.