What does a Real Estate Investment Trust (REIT) primarily enable for small investors?

A Real Estate Investment Trust (REIT) primarily enables small investors to combine their funds and benefit from various tax advantages, particularly the protection from double taxation. REITs pool capital from many investors to purchase, manage, and sell income-generating properties. By doing so, they allow individual investors access to income and long-term capital appreciation from real estate investments that would be difficult to achieve on their own.

Additionally, the structure of a REIT requires that they distribute at least 90% of their taxable income to shareholders in the form of dividends, which adds to the appeal for small investors. This aspect, along with the fact that REITs typically operate under a special tax structure, helps avoid the double tax that can occur with traditional corporations, where profits might be taxed at both the corporate and the shareholder level. Thus, small investors can participate in real estate markets with lower investment thresholds and reduced overall tax burdens, enhancing their investment strategies.