Which of the following are the two categories of REITs?

The correct classification of REITs into two main categories is based on their investment focus, which divides them into mortgage and equity REITs. Equity REITs primarily invest in income-producing real estate and derive their revenue mainly from leasing space and collecting rents on the properties they own. These types of REITs generally focus on the ownership of physical properties such as shopping malls, apartment buildings, and office complexes.

On the other hand, mortgage REITs invest in mortgage loans or mortgage-backed securities, earning income from the interest on those loans. This category typically focuses on providing financing to real estate owners and operators, rather than directly owning physical properties.

Understanding these categories is crucial for investors and professionals in the real estate sector, as they have differing risk profiles, income strategies, and ways to generate returns. While the other options define different aspects or classifications of real estate investment, they do not specifically categorize REITs as explicitly as mortgage and equity do. For example, public and private refer to the structure of the REIT, not its investment strategy. Similarly, short-term and long-term, and tax-deferred and tax-advantaged relate to the investment horizon and tax implications, rather than the fundamental classifications of REITs themselves.