BALTIMORE ( Stockpickr) -- Real estate investment trusts (REITs) have come full circle in the past few years. These publicly traded companies were once one of the most popular ways to gain entry to the red-hot real estate market -- and the most accessible by far. Then, as the real estate bubble burst, solvency fears sent investors running to hit the "sell" button.But while we're still far from the REIT-hungry environment of the mid-2000s, things are starting to turn around, and REIT investors who held out could soon see major recoveries in their portfolios. While REITs do offer exposure to real estate, thinking of these trusts as "real estate mutual funds" is a bit off. Instead, these trusts are income-generation instruments that leverage their property portfolios to generate massive dividends for shareholders. And in 2011, REITs are in better financial shape than ever before. Related: 5 Stocks With Big Insider Selling Of course, that hasn't stopped short-sellers from piling on against them, and these firms offer a phenomenal opportunity for a short-squeeze right now. A short squeeze is the buying frenzy that ensues when a heavily shorted stock starts to look attractive again to investors, causing share price to skyrocket. One of the best indicators of just how high a short-squeezed stock could go is the short interest ratio, which estimates the number of days it would take for short-sellers to cover their positions. The higher the short ratio, the higher the potential profits when the shorts get squeezed. Naturally, these three plays aren't without their blemishes -- there's a reason that these stocks are being heavily shorted. But for investors looking for exposure to a speculative play with a beefier risk/reward tradeoff, these could be powerful upside plays for the coming year. With that, here's a look at REITs with short-squeeze potential in 2011.
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