What are the two main types of REITs?

The two main types of Real Estate Investment Trusts (REITs) are indeed Equity REITs and Mortgage REITs.

Equity REITs primarily invest in and own income-generating real estate properties. They are focused on generating revenue through property operations, which means their income is derived mainly from rents collected from tenants. The value of an Equity REIT is closely tied to the performance of the underlying real estate properties they own, and they benefit from property appreciation and rising rental income over time.

On the other hand, Mortgage REITs (mREITs) provide financing for income-producing real estate by purchasing or originating mortgages and mortgage-backed securities. Their revenue comes mainly from the interest earned on the mortgage loans, hence they are more sensitive to interest rate changes than Equity REITs. This distinction is vital, as it reflects different investment strategies and financial performances within the broader REIT category.

Understanding these two types is crucial for anyone involved in real estate investments, as they represent distinct approaches and market behaviors in the REIT sector.