What is the minimum percentage of total assets that a REIT must invest in real estate?

A REIT, or Real Estate Investment Trust, must invest at least 75% of its total assets in real estate to meet the requirements set forth by the Internal Revenue Service (IRS) in the United States. This rule is fundamental for a REIT to maintain its status and benefit from pass-through taxation, which allows it to avoid corporate income tax as long as it distributes at least 90% of its taxable income to shareholders in the form of dividends.

Investments counted towards this 75% requirement include properties like residential, commercial, and industrial real estate, as well as mortgages on real property. This regulation ensures that REITs primarily focus on real estate investments, thereby distinguishing them from other types of investment vehicles that may have broader or different investment strategies.

The other percentage options do not align with the IRS's requirements for REITs. Specifically, the lower percentages would indicate an insufficient commitment to real estate, which would compromise the core purpose of a REIT and its favorable tax treatment.