subject: Private REIT vs Public REITs [print this page] Private REIT vs Public REITs Private REIT vs Public REITs
Today I'm going to talk about how private REITs differ from Public REITs.
You'll recall that REIT stands for Real Estate Investment Trust.
REITs typically offer investors all the rewards of a long-term investment, which include:
capital appreciation,
monthly cash flow
and asset-backed security
You may also have heard there are two kinds of REITs: public and private.
Units in public REITs are listed traded on the stock exchanges. So, when investors buy publicly traded units, they pay the current market price for the stock, which does not necessarily reflect the actual values of the underlying properties.
Just like any other stock, the value of publicly-traded REITs can fluctuate constantly. In contrast, privately-held REITs are not tied to the market, and are therefore not subject to wild market swings and volatility.
Real estate on its own is distinct from other investments or commodities in that it is insulated from the fluctuations of the public markets.
As well, with private REITs, a unit's price is based on the most recent appraised values of the properties.This means the price you pay is not affected by other investors entering or leaving the market.
Private REITs can offer some tax savings unavailable when investing in a public company. So, while they share the same name, and the same underlying asset - real estate - the basic differences between public and private REITs are something investors need be become aware of, so they can make the best informed decision for them.
REIT investors enjoy the benefits of individual ownership of real estate while avoiding a number of burdens:
Investors are not are faced with the day-to-day management responsibilities common with individual ownership of real estate
As well there is no personal liability for debt or litigation like you would have for individual ownership of real estate
The combination of these characteristics makes REITs an ideal vehicles for producing reliable income and building sustainable wealth.
Group-owned real estate investing is a big subject, and I look forward to exploring it with you more next time.
In upcoming articles, we'll learn more about different types of REITs, including MICs, and Limited Partnerships too.
