Types of REITs
The three main REIT structures—equity, mortgage, and hybrid—each investing differently in real estate assets and generating distinct risk-return profiles.
What is REIT Types?
Real estate investment trusts (REITs) are classified by how they invest in real estate. Equity REITs—the most common type, comprising the vast majority of the REIT market—own and operate income-producing properties such as apartment complexes, shopping centers, office towers, industrial warehouses, data centers, and healthcare facilities. Their income derives primarily from rent collected from tenants, and returns reflect both dividend income and property value appreciation. Mortgage REITs (mREITs) do not own properties; instead they invest in real estate debt—mortgages and mortgage-backed securities. Their income is the spread between the interest they earn on mortgage assets and their cost of borrowing (often short-term). Mortgage REITs are highly sensitive to interest rate movements and carry more leverage risk than equity REITs. Hybrid REITs combine both equity and mortgage strategies, owning properties and holding real estate debt simultaneously. Within equity REITs, the NAREIT REIT industry classification system further divides them by property sector: retail, industrial, residential, office, healthcare, self-storage, diversified, lodging/resorts, specialty, data centers, infrastructure, and timberland.
Example
An investor comparing REIT types reviews: (1) Prologis (PLD), an equity REIT specializing in industrial/logistics properties, yielding approximately 3% with steady NAV growth; (2) AGNC Investment Corp (AGNC), a mortgage REIT investing in agency mortgage-backed securities, yielding 12%+ but with significant interest-rate sensitivity; and (3) Broadstone Net Lease (BNL), a diversified equity REIT with net lease properties across industrial, healthcare, and retail. The investor selects Prologis for core exposure and notes that mortgage REITs carry a materially different risk profile unsuitable for capital-preservation goals.
Source: Nareit — What's a REIT?