Public and Private Equity REIT Investing

As previously mentioned REITS are a sort of managed mutual fund that center on managing, selling, renting properties or lending money to facilitate such ventures. What needs to be understood is that there are two types of REITS that one can invest in: public or private equity REIT funds. While it would seem that on the surface there is little difference between the two the differences that do exist are so radical that understanding the differences is critical before making an investment. The REITS are known as Public and Private REITs.

Public REITS – Public REITS refer to those investment trusts that are offered publicly on the stock exchange. These REITS can be purchased and sold at the will of the investor. They are generally not considered high risk investments although high risk versions surely exist. Also, most of the returns on such REITS are modest as will any low risk investment.

Private REITS – Private REITS are not offered as public stock and are essentially the equivalent of investing in a business. These REITS are generally aggressive with potential high risks, but the payoffs on a private REIT have the potential to be significant. Please note that when one purchases a private investment the stock can not be sold! Instead, the duration of the term of the REIT is specified (say 7 years) and then dividends are paid out (hopefully) over the course of those 7 years with the intention of recouping the initial investment and then exceeding it as a competitive interest rate. If the REIT turns out to be a lemon, however, there is no way out of it. So, please understand these complexities before getting involved.