Oregon 30-Hour Real Estate Law Practice Test

What does a Real Estate Investment Trust (REIT) primarily do?

1. Provides loans to homeowners

2. A company that owns and operates income-producing real estate and offers investment opportunities to shareholders

3. Manages residential properties for landlords

4. Conducts real estate appraisal services

The correct answer is: A company that owns and operates income-producing real estate and offers investment opportunities to shareholders

A Real Estate Investment Trust (REIT) primarily focuses on owning and operating income-producing real estate, such as commercial properties, apartment buildings, and warehouses. This structure allows the REIT to pool the investment of multiple shareholders to acquire large-scale real estate assets that might be difficult for individual investors to access. By doing this, REITs provide an opportunity for everyday investors to benefit from income-generating real estate without having to buy or manage properties directly themselves. Additionally, REITs are required to distribute a significant portion of their income to shareholders in the form of dividends, making them an attractive investment for those seeking regular income. They also often trade on major stock exchanges, providing liquidity that is not typically available in direct real estate investments. The other options represent different aspects of the real estate market but do not accurately describe the primary function of a REIT. For example, providing loans to homeowners is specific to mortgage lenders; managing residential properties pertains to property management firms; and conducting appraisal services relates to valuing properties rather than owning or operating them. Each of these activities plays a role in the broader real estate industry, but they are distinct from the central purpose of a REIT.