Real estate investment trusts (REITs) are companies that manage a portfolio of real estate assets for the benefit of their shareholders. There are two main types of REITs: equity REITs, which invest in and own properties, and mortgage REITs, which invest in mortgages. To qualify as a REIT, a company must distribute at least 90 percent of its taxable income to shareholders each year. Shares of public REITs trade like stocks on the major exchanges. REITs were established as pass-through entities by federal legislation in 1960, which eliminated double taxation. REIT data in the flow of funds accounts begin in 1968. REITs invest in several different types of real estate, including residential, retail, office, industrial, health care, hotel properties, and self-storage facilities.
With the 2007 revision of the North American Industry Classification System, or NAICS, equity REITs were reclassified from a financial category to a nonfinancial category (sector 53, Real Estate subsector). Mortgage REITs remained in a financial category (sector 52, Other Financial Vehicles subsector). However, in the flow of funds accounts, both equity REITs and mortgage REITs are included in the financial sector.