Real Estate Investment Trusts (REIT) began in the 1960s as a way to provide investors with a vehicle to earn the returns from commercial real estate investments normally available only to those with large resources. REITs issue securities that they sell like stock on the major exchanges.

REITs typically invest in commercial real estate directly, either through direct ownership of properties or mort-gages. While REITs usually specialize in a particular property type, they can invest in a range of properties including sizable shopping malls, office buildings, apartments, warehouses and hotels.

REITs receive special tax considerations and typically offer investors dividend yields, as well as providing a highly liquid method of investing in real estate. To qualify for REIT status, a company must distribute at least 90% of its annual taxable income to shareholders in the form of dividends. The REIT model was designed to provide a real estate version of the equity structure that mutual funds provide.

A Mortgage REIT makes or owns loans and other obligations that are protected by a real estate guarantee. Despite their name, mortgage REITs typically neither manage properties nor make loans to property buyers directly. Instead, mortgage REITs invest in mortgage-backed securities.

Mortgage REITs' revenues are generated by the interest that they earn on the mortgage loans. Like banks, they profit from the difference between the short-term interest rates they pay and the long-term interest rates they collect.

Equity REITs invest in and own income-producing properties, and thus benefit from the value and cash flow of their real estate assets. Their revenues come principally from their properties' rents and appreciation on prop-erties sold at profit. Equity REITs are not secured by real estate collateral.

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