SIE practice questionmediumREITs — Equity vs Mortgage
What is the primary difference between an equity REIT and a mortgage REIT?
- AThere is no difference — they are the same investment type
- BEquity REITs are publicly traded; mortgage REITs are not
- CEquity REITs own and operate properties; mortgage REITs invest in mortgages and mortgage-backed securities✓ Correct answer
- DEquity REITs invest in stocks; mortgage REITs invest in bonds
Explanation
Why C — Equity REITs own and operate properties; mortgage REITs invest in mortgages and mortgage-backed securities
Equity REITs own and operate income-producing real estate (offices, apartments, malls) and earn rental income. Mortgage REITs lend money to real estate owners or invest in mortgage-backed securities, earning interest income. Mortgage REITs are more sensitive to interest rate changes. Both types can be publicly traded or non-traded. Hybrid REITs combine both strategies.
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