REITs offer a simpler way to invest in real estate than purchasing assets, with exposure to commercial properties. Unlisted REITs are less liquid and sold at a fixed price, but offer higher dividends, while listed REITs are more liquid and have lower fees. Some REITs focus on single-tenant properties for stable income.
Investing in real estate can require a large initial investment, and the money can be tied up for months or even years at a time. Real Estate Investment Trusts, or REIT investments, are a way to gain access to the real estate asset class in a simpler way than purchasing assets. A REIT is an index that trades like an individual stock.
REIT investments 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 public stocks. Certain REIT investments may focus on single-tenant properties, while others may only purchase commercial properties where there are multiple tenants.
An unlisted REIT has to list its investment vehicle with a regulatory agency even though the shares are not listed on a stock exchange. These securities can be purchased from a broker-dealer for a fee and commission, with part of that expense going to the sponsor or issuer of the non-public REIT. These fees tend to be higher compared to buying public REITs.
Unlisted REITs are generally sold at a fixed price as opposed to listed REITs, which experience price movements every trading day in response to market activity. The issuer of an unlisted REIT pays dividends to investors 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 as easily. Investors may be limited to withdrawing only a small percentage each year for the duration of the unlisted REIT, and as a result, these securities support a long-term investment strategy.
Shares in the publicly listed investment REITs will be traded on a major stock exchange under a trading symbol. Investors can buy and sell these investments in a similar way to buying and selling shares through a stockbroker. Public REIT investments are a gateway to the commercial real estate market for the average investor. Listed REITs also pay investors a dividend based on income. The fees and commissions paid to brokers for public REITs tend to be lower compared to non-public REITs.
REITs are in the business of buying commercial property, with some focusing on properties of a certain size. For example, some REITs might be comprised of only single-tenant properties, while others more broadly buy multi-tenant buildings. Money managers of a single-tenant REIT may only purchase properties where there is a long-term lease with a reputable tenant to ensure a stable income.
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