Real Estate Investment Trusts (REITs) are popular investments for real estate investors. REITs allow investors to buy into a portfolio of properties without having to purchase them individually. But not all REITs are created equal; there are publicly traded REITs and non-traded REITs, each with their own pros and cons. Let’s take a look at the differences between the two so that you can decide which is right for you.
Liquidity
The biggest difference between publicly traded and non-traded REITs is liquidity. Publicly traded REITs can be bought and sold on the stock market just like any other stock, making them easy to buy and sell quickly. This makes them ideal for investors who want to take advantage of short term changes in the market, or for those who need access to their money quickly.
Non-traded REITS, on the other hand, are not liquid investments as they are not traded on public exchanges. These types of REITs have a much longer investment timeline since they cannot be sold until they reach maturity, which can take up to 10 years. This means that if you need access to your money before then, you will likely have to sell it at a discount due to early termination fees or lack of buyers.
Returns
Publicly traded REITS offer potential returns based off market volatility; when the stock market goes up so too do your returns, but when it goes down yours may suffer as well. Non-traded REITS offer more predictable returns since they aren’t affected by day-to-day fluctuations in the market, however these returns tend to be lower than those offered by publicly traded REITS due to their lack of liquidity. Additionally, non-traded REITS charge higher upfront fees than publicly traded ones because of their complexity and illiquid nature; these fees can eat into your bottom line profits significantly over time so it’s important to factor this into your decision making process when choosing an investment strategy.
When deciding whether or not an investor should invest in a publicly traded or non-traded REIT, it comes down to what kind of return you’re looking for and how much liquidity you need from your investments. If you’re looking for more predictable returns with less risk involved then non-traded might be better option for you while if you’re willing to accept some risk in exchange for potentially higher returns then publically traded might be better fit your needs. No matter which option you choose make sure that understand all the associated costs involved before investing so that there won’t be any surprises down the road!
