Locking in tax-advantaged income and portfolio diversification through high-quality real estate investments

Real estate investment trusts maximize shareholder value through management expertise and operating efficiencies at scale.

What is a real estate investment trust (REIT)?

A REIT is a company that owns, operates or finances income-producing real estate by pooling the capital of many investors to purchase and operate a portfolio of institutional-grade assets.

The REIT structure enables individual investors to obtain tax advantages and generate potentially substantial total returns through rent growth and asset appreciation, while reducing risk through diversification.

• Created by Congress in 1960, REITs allow individuals to invest in private real estate.
• Investors own shares in the REIT rather than deeds to buildings.
• REITs must distribute at least 90% of taxable income to shareholders annually.

Most REITs hold real estate through an operating partnership (OP). The REIT usually serves as the OP’s general partner and owns most of its partnership units, or fractional interests.

Why invest in a REIT?

Millions of Americans invest in REITs, benefitting from real estate ownership without having to buy, manage or operate the properties within their diversified portfolio.

• Diversification across many properties, markets and tenants rather than one asset.
• Potential for regular income distributions and long-term appreciation.
• Lower investment minimums than direct ownership.

REITs currently own more than $4.5 trillion of gross real estate nationwide, and in 2024 delivered $112.5 billion in dividend distribution.¹

How are REITs taxed?

REITs typically don’t pay corporate income taxes because they are “pass-through” entities, meaning they pass along their earnings to investors in the form of dividends. They provide other significant tax advantages as well, including a 20% deduction for qualified dividends.

• Most dividends that investors receive are taxed as ordinary income.
• Potential Section 199A qualified business income deduction.
• Return of capital is not taxed in the year it is received, lowering the cost basis.

Partnership units vs shares

Most people invest in a REIT by either acquiring limited partnership units as part of a real estate transaction, such as an UPREIT, or by directly investing in REIT shares, or securities.

For instance, Section 721 of the U.S. Tax Code allows Delaware statutory trust (DST) investors and other property owners to contribute real property to a REIT’s OP in exchange for limited partnership units without recognizing a capital gain at the time of contribution. Learn more about DST-to-UPREIT transactions.

Shares, or REIT common stock, allow investors to become part owners of the REIT, which itself manages the OP. These distinct investment pathways give investors different voting rights but provide for the same level of dividends.

Capital Square Housing Trust

Capital Square Housing Trust, a REIT, is an open offering sponsored by Capital Square that employs a disciplined capital allocation strategy, providing income and growth from a mix of multifamily and build-for-rent housing communities. Learn more about this offering.

REITs involve risk, distributions are not guaranteed and non-traded REIT shares are illiquid.

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¹ REITs by the numbers, Nareit, Q1 2026