A little-known real estate investment vehicle in the U.K. is the real estate investment trust (REIT). In this article, we’ll discuss this method of property investing and present some information you might find useful if you’re considering investing in a REIT.REIT BasicsThe first thing to know about a REIT is that it’s a way for corporations to buy investment real estate in way such that their corporate income taxes are reduced or eliminated. REITs are required by law to distribute 90% of their income, a fact that makes them very attractive to real estate investors. REITs are similar to mutual funds for stock investments, except that they function with real estate rather than stocks. Since mutual funds are safer investments than buying individual stocks, REITs are safer investments than buying individual pieces of real estate property. They’re great ways to buy investment property without all the risk and expenses associated with direct ownership.Types of REITsREITs are similar to corporations in that they can be held publicly or privately. If publicly held, REITs can be listed on public stock exchanges in the same way shares of common stock in corporations are listed. There are 3 types of REITs: equity, mortgage and hybrid. Equity REITs involve ownership of and investment in real properties and their income comes primarily from the rents charged on these real estate investments. Mortgage REITs involve ownership of and investment in property mortgages. Their income comes from the interest they earn on mortgage loans. Hybrid REITs generate income from both real estate investing and making mortgage loans.Features of REITsIn the U.K., real estate investment in REITs is governed by the Finance Act of 2006. The legislation became effective in January of 2007. At that time, REIT status was granted to 9 property companies in the U.K. Key features of REITs in the U.K. include the following:The company must be located in the U.K. and must be listed on a recognized stock exchange.A single person or entity cannot hold the majority of the shares in the company. A single person or entity cannot hold more than 10% of the shares.The property-letting activities of the REIT must comprise at least 75% of the company’s overall business activities, including both income and assets.Investors must receive at least 95% of the REIT’s net taxable profits, but the REIT must withhold any applicable taxes.Reasons to Invest in REITsProperty companies that convert into REITs will benefit substantially from both the tax exemption and the increased ability to generate income via the stock market. Investors benefit because they gain access to the asset class property investing with its significant dividend returns. REITs also provide good diversification, a must for any serious investor. So, if you’re looking to introduce some diversity into your holdings, consider the real estate investment known as a REIT in the U.K.