Real estate investment trust (REIT)

Real estate investment trust (REIT)

What is a REIT?

A real estate investment trust, or REIT, is a company that owns, operates or finances income-producing commercial real estate or related assets. In this way, REITs allow investors to “own” or help finance real estate assets by simply owning shares.

REITs invest in a broad range of property types including office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities and warehouses. 

Size of the REIT market1

REITs collectively own nearly $4 trillion in gross assets across the U.S., the majority of which are owned through publicly traded REITs ($2.5 trillion).

150 million Americans live in households with REIT investments—through their 401(k) and other investment funds.

Types of REITs

Equity REITs own or operate income-producing real estate. 

Commercial mortgage REITs provide financing for income-producing real estate investments, typically by investing in floating-rate mortgage loans. 

Publicly traded REITs are traded on a national exchange and offer daily liquidity.

Public non-traded REITs are registered with the SEC but not traded on a national exchange. They typically feature limited liquidity. 

NAV REITs NAV REITs regularly disclose the net asset value (NAV) of its shares, conduct offerings of its stock at prices based on the NAV per share, repurchase its shares of stock at prices based on the NAV per share and are not publicly traded on a stock exchange.

Private REITs do not trade on a national exchange, are exempt from SEC registration and generally can be sold only to institutional investors.

Tax treatment of REITs

The Tax Cuts and Jobs Act of 2017 introduced a change to the taxation of ordinary REIT dividends.²

  • REITs are generally not taxed at the corporate level to the extent they distribute all of their taxable income as dividends. 
  • The tax law provides a 20% deduction on ordinary REIT dividends. 
  • As a result, REIT investors receive higher after-tax income compared to that under the prior tax law. 

The impact of the tax law change for REIT distributions:


Distribution rate


Tax-equivalent distribution rate2

Based on a REIT with a 7.0% distribution rate and assumes a 37% tax bracket

FS Credit REIT’s failure to qualify or remain qualified to be taxed as a REIT would adversely affect the NAV and the amount of cash available for distribution to stockholders.

Read why the Tax Cuts and Jobs Act may mean more after-tax income for REIT investors.

Investor considerations

Investors need a clear understanding of the risks and benefits of REITs to make well-informed decisions on how to best incorporate them to construct diversified portfolios. Investors should take into account their own financial situation and perform thorough research before making any investment decisions concerning REITs.

More on real estate

Read timely insights on the broader commercial real estate market from our investment research team.

  • NAREIT,, as of 6/30/2023.

  • Dividends that are not declared as capital gain dividends or qualified dividend income.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

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