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Most REITs have a straightforward business model: The REIT leases space and collects rents on the properties, then distributes that income as dividends to shareholders. Mortgage REITs don't own real estate, but finance real estate, instead. These REITs earn income from the interest on their investments. To qualify as a REIT, a company must comply with certain provisions in the Internal Revenue Code (IRC). These requirements include to primarily own income-generating real estate for the long term and distribute income to shareholders. 3 Specifically, a company must meet the following requirements to qualify as a REIT: Invest at least 75% of total assets in real estate, cash, or U.S. Treasuries Derive at least 75% of gross income from rents, interest on mortgages that finance real property, or real estate sales Pay a minimum of 90% of taxable income in the form of shareholder dividends each year Be an entity that's taxable as a corporation Be managed by a board of directors or trustees <a href="https://greenheritagegroup.co.uk/">Investment,</a> Have at least 100 shareholders after its first year of existence Equity REITs. Most REITs are equity REITs, which own and manage income-producing real estate. Revenues are generated primarily through rents (not by reselling properties). Mortgage REITs. Mortgage REITs lend money to real estate owners and operators either directly through mortgages and loans, or indirectly through the acquisition of mortgage-backed securities. Their earnings are generated primarily by the net interest margin—the spread between the interest they earn on mortgage loans and the cost of funding these loans. This model makes them potentially sensitive to interest rate increases. Hybrid REITs. These REITs use the investment strategies of both equity and mortgage REITs.