Real Estate Investment Trusts (REITs) offer various modes of investment for investors. Let’s compare some of the popular modes of investment in REITs:
- Direct Investment in Publicly Traded REITs: This is the most common mode of investment in REITs, where investors can buy and sell shares of publicly traded REITs on stock exchanges. The advantages of this mode of investment include high liquidity, easy accessibility, and diversification. However, the disadvantage is that investors have no control over the management and operations of the REIT.
- Non-Traded REITs: In this mode of investment, investors can buy shares of REITs that are not listed on stock exchanges. These are typically sold through brokers or financial advisors. The advantages of non-traded REITs include potentially higher returns, as they are not subject to market fluctuations, and access to non-public real estate investments. However, the disadvantage is that these investments are illiquid and have high upfront fees and commissions.
- Private REITs: These are similar to non-traded REITs, but are only available to accredited investors who meet certain net worth and income requirements. Private REITs offer potential tax benefits and higher returns than publicly traded REITs or non-traded REITs, but have limited liquidity and high minimum investment requirements.
- REIT Mutual Funds: These are mutual funds that invest in a portfolio of publicly traded REITs. The advantages of REIT mutual funds include diversification, professional management, and easy accessibility. However, the disadvantage is that these funds have management fees and are subject to market fluctuations.
- ETFs: REIT exchange-traded funds (ETFs) are similar to REIT mutual funds, but are traded on stock exchanges like individual stocks. The advantages of REIT ETFs include easy accessibility, diversification, and low fees. However, the disadvantage is that investors may have to pay a brokerage commission to buy and sell shares.
Overall, the mode of investment in REITs that an investor chooses depends on their investment goals, risk tolerance, and liquidity needs. Investors should carefully consider the advantages and disadvantages of each mode of investment before making a decision.