Your quick guide to investing in private REITs

 Your quick guide to investing in private REITs


If you are looking to get started in the real estate industry, REITs are a great step forward. These real estate companies can be broadly classified as private REITs and public REITs. As the name suggests, public REITs can be found listed in the various capital markets around the world that are open to retail investors. On the other hand, private REITs only allow institutional or accredited investors to become a part of their business journey. 



 


Private REITs are not that complicated to understand - to know more, read on. 


How are Private REITs capable of providing higher returns as compared to their public counterparts?


Private market assets such as privatized REITs do not need to register with any regulatory authority. As a result, have a freer hand in taking business decisions and operate at a reduced cost. This helps them to pump the returns they offer to their investors and present themselves as highly profitable private market financial assets. Unlike publicly traded REITs, the shares of these privatized real estate investment trusts are not affected by the fluctuations in the public market and thus prove to be less volatile and more predictable. Private REITs, as a result of this, are the perfect way to gauge the property market without dealing with the price movements of the public markets. REITs are required to pay 90% of their profit as dividends to their investors regardless of them being a public entity or a private one.

 



If they are so amazing, what’s the catch? 


The catch is - not everybody can invest in private REITs. To qualify as an investor in the private markets, one needs to either do it as an institutional investor or an accredited investor. Investing in privatized REITs is like part-owning the company, which means the luxury of capital liquidity is not available to you. This also means that adding privatized REITs to your investment portfolio would require a capital amount in millions even to make an entry-level investment. Many private market financial assets, not just REITs, have a lock-up period during which the investors are unable to withdraw their invested capital. This is all good and shiny till a moment of emergency arrives where you need the money and are not prepared with a backup fund to help you in such dire situations. The income you generate from a REIT in the form of dividends is taxed just like any other source of income. 



 How can you make private REITs a part of your investment portfolio? 


Provided you are an accredited investor or a qualified institutional investor, you can either source the shares of these privatized REITs directly from them or approach brokers to help you with the process. It is recommended to research the brokers and choose the trustworthy ones with a few good years of experience under their belt as they can thoroughly guide you with the whole documentation process and even assist you with the selection of the right REIT according to your risk potential, budget, preferences, etc. 


We hope this article proves helpful when you set out to expand your investment portfolio with the help of private REITs. All the best! 




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