What is a primary characteristic of a Mortgage REIT?

A primary characteristic of a Mortgage REIT (Real Estate Investment Trust) is that it invests in mortgage-backed securities. This type of REIT primarily focuses on providing financing for income-producing real estate by purchasing or investing in mortgages and mortgage-backed securities rather than owning or managing physical real estate properties.

By doing this, Mortgage REITs typically generate income from the interest earned on the mortgages and other financial instruments they hold. This investment strategy allows them to benefit from the cash flow produced by these financial assets while avoiding the direct responsibilities of property management, which differentiates them from equity REITs that actually own and manage real estate properties.

This distinction is key: while physical property ownership and management would fall under the domain of equity REITs, Mortgage REITs concentrate exclusively on the financial side of real estate investments, thus making their investment model unique.