REIT investments provide an easier way to access the real estate asset class than buying assets. Unlisted REITs are less liquid and have higher fees, but offer higher dividends. Public REITs are more accessible and have lower fees. REITs can focus on certain types of commercial properties.
Investing in real estate can require a large initial investment, and money can be locked up for months or even years at a time. Real estate investment trusts, or REIT investments, are an easier way to access the real estate asset class than buying assets. A REIT is an index that trades as a single security.
Investments in REITs contain exposure to commercial properties, such as shopping malls. There are some REITs that are not listed and cannot be purchased in the same way as a public stock. Some REIT investments might focus on single-tenant properties, while others might only buy commercial properties where there are multiple tenants.
An unlisted REIT must list its investment vehicle with a regulatory agency even if the shares do not trade on a stock exchange. These securities may be purchased through a broker dealer for a fee and commission, and a portion of that expense will be directed to the sponsor or issuer of the private REIT. These fees tend to be higher than buying public REITs.
Investments in unlisted REITs typically sell for a fixed price unlike listed REITs, which experience price movements each trading day in response to market activity. The issuer of a private REIT pays investors dividends from income received on commercial properties, and dividends from non-public REIT investments tend to be higher than public REIT dividends. While a listed REIT is considered a liquid investment, unlisted REIT investments are less liquid and cannot be sold easily. Investors may be limited to withdrawing only a small percentage each year over the life of the unlisted REIT, and as a result, these stocks support a long-term investment strategy.
Public investment in REITs lists the stock to be traded on a major stock exchange with a trading symbol. Investors can buy and sell these investments similar to the way stocks are bought and sold through a stockbroker. Investments in public REITs are a gateway to the commercial real estate market for the average investor. Listed REITs also pay investors an income-based dividend. Commissions and fees paid to brokers for public REITs tend to be lower than for non-public REITs.
REITs engage in the purchase of commercial properties, and some focus on properties of a certain size. For example, some REITs may consist of single-tenant properties only, while others more generally purchase multi-tenant buildings. The fund managers of a single-tenant REIT may only purchase properties on a long-term lease with a reputable tenant to ensure a steady income.
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