Oregon 30-Hour Real Estate Law Practice Test

What is the primary focus of an equity REIT?

1. Investing in mortgage securities

2. Owning and managing income-producing properties

3. Providing short-term loans to real estate developers

4. Engaging in property flipping activities

The correct answer is: Owning and managing income-producing properties

The primary focus of an equity REIT (Real Estate Investment Trust) is owning and managing income-producing properties. Equity REITs generate revenue primarily through leasing space and collecting rents on the properties they own. This income is then distributed to shareholders in the form of dividends. Equity REITs typically invest directly in commercial real estate such as apartment complexes, shopping malls, office buildings, and industrial properties. Their objective is to generate a stable income stream over the long term, which makes them a popular choice for investors looking for both income and capital appreciation. In contrast, other options involve different aspects of real estate investment. For example, investing in mortgage securities relates to mortgage REITs, which focus on the financing rather than the physical properties. Providing short-term loans is also a function of certain real estate investment models but does not align with the main operations of equity REITs. Engaging in property flipping involves buying properties to renovate and sell quickly for profit, which is a strategy unrelated to the long-term income focus that characterizes equity REITs.