Real Estate Investment Trust (REIT)

A REIT is a company holding or lending on income property that must pay out the bulk of its taxable income to its shareholders as dividends. Many trade on stock exchanges. REITs are the main alternative to owning rentals directly, and they are valued on different measures than gross rent multiplier.

Public REITs are usually priced on funds from operations and on net asset value, which rests on property cap rates. Gross rent multiplier plays little part, because REIT portfolios hold property types with very different expense structures.

For a direct investor, a REIT's dividend yield is a useful comparison. It shows the income available from real estate with no management and daily liquidity. A rental's net return should clear that bar by enough to pay for the work and the concentration risk of owning one property.

Further reading: Real Estate Investment Trust (REIT) on Wikipedia.