Which type of REIT primarily uses investors' capital to purchase real estate?

The correct answer focuses on equity REITs, which primarily utilize investors' capital to acquire and manage income-generating real estate properties. These investments can include commercial buildings, apartments, and shopping centers, generating revenue through rents collected from tenants.

Equity REITs are distinct in that their primary investment strategy revolves around owning property outright and deriving income from those properties. This approach allows investors to benefit from both rental income and the potential appreciation in property values over time. Furthermore, equity REITs typically pay dividends to investors from the income generated by these properties, making them attractive to those looking for regular income along with investment growth.

In contrast, mortgage REITs focus on investing in mortgage loans and mortgage-backed securities, thus earning income from the interest on these financial instruments rather than directly owning real estate. Hybrid REITs combine elements of both equity and mortgage REITs but do not exclusively focus on using investor capital for purchasing real estate like equity REITs do. Public refers to the structure of the REIT, indicating that it is publicly traded, but it does not determine the investment strategy; therefore, it does not specifically relate to the primary use of investors' capital.