Real Estate Investment Trusts (REITS) are investment vehicles that allow investors to pool their money to invest in real estate assets. There are several types of REITs, including private non-traded REITs, publicly traded REITs and public non-traded/non-listed REITs.
Here's a breakdown of the key differences between these types of REITs:
Private Non-Traded REIT:
» Not listed on stock exchanges and not publicly traded. Typically sold through broker-dealers or financial advisors to accredited investors or high net-worth individuals.
» May offer potential benefits such as diversification and potentially higher returns than publicly traded REITs due to a focus on non-publicly traded real estate properties.
» Non-traded REITs are designed to reduce or eliminate tax while providing returns on real estate.
» Non-traded REITs are subject to IRS requirements that include returning 90% of taxable income to shareholders.
Public Non-Traded or Non-Listed REIT:
» Registers with the SEC but does not trade on public stock exchanges. Typically sold through financial advisors and broker-dealers to retail investors.
» Operate like publicly traded/publicly listed REITs in nearly every other way except they typically face redemption restrictions that limit their liquidity.
» Provide a level of liquidity compared to private non-traded REITs, but it is still limited compared to publicly traded REITs. They often have specific redemption programs that allow investors to redeem their shares at certain intervals or under specific conditions.
» Valuations of public non-traded REITs can be challenging, as they are often valued periodically by independent thirdparty appraisers. Valuations typically occur quarterly.
» Non-traded REITs are designed to reduce or eliminate tax while providing returns on real estate.
» Non-traded REITs are subject to IRS requirements that include returning 90% of taxable income to shareholders.
Publicly Traded REIT:
» Listed on stock exchanges and can be bought and sold by investors just like regular stocks. Offer high liquidity as investors can trade their shares on the market.
» Publicly traded REITs are subject to market fluctuations and can experience price volatility based on investor sentiment and broader market conditions.
» Provide a level of transparency, as they are required to disclose financial information and adhere to regulatory reporting standards.
It is important to research and consider financial goals, risk tolerance and investment horizon prior to investing in Private REITs. Consult with a financial advisor who can provide customized advice based on individual circumstances.
