4 features of the best performing private REITs

Private REITs are a great way to enter the real estate market. REIT essentially stands for Real Estate Investment Trusts; these are companies that manage a portfolio made of various money-making properties. There are namely 6 types of REITs present in the market today and each is identified on the strategy they use - Equity REITs, Mortgage REITs, Hybrid REITs, Public REITs, Private REITs, and public but non-tradeable REITs. 

In this article, we will look at the 4 features of all the best-performing private REITs present in the market today –



      

1)     Higher returns than their public counterparts

 

Regardless of which type of private REITs you decide to invest in, the good ones have a track record of providing higher returns when compared to their exact public counterparts. While private REITs are able to provide their investors with a minimum of 7% to 8% returns on their invested capital amount, public REITs are able to reach the bar of 5% to 6% returns on an average comparatively.

 

2)     They are not very volatile

 

Since reit investing are not listed on the public indices, they are not affected by the fluctuations that happen in the public market and are one of the best ways to gauge the potential and strength of the real estate industry at any given point. The avalanche effect of the public markets is also easily avoided, wherein, when one of the major players of a certain industry has a falling stock price, the share price of their competitors in the same industry also starts to drop. Since private REITs are not connected to each other and their income solely depends on their own performance, the returns they provide have infrequent updates when compared to their public counterparts.

 

3)     They have a lower compliance cost

 

Public REITs are regulated by the government of their originating country and to comply with these set rules many times they have to sacrifice a higher profit. Privately run REITs, however, are not regulated by any special government body, and thus are able to maximize their profit potential and take bold decisions to help them borne higher returns by taking rather riskier financial decisions. If you are investing in a REIT for the first time, do it via a broker, though you would be required to pay a brokerage fee, you would find it immensely helpful as they would assist you with the selection and documentation process of the same.


4)     They either have above the average quality or quantity

 

The best performing reit investing either have a lot of money-making properties in various domains like commercial, residential, etc. or have a few luxury real estates that bring high returns to compensate for the lack of quantity. The type of tenants REITs deal with on a regular basis is also important and the best ones only choose to work with quality tenants.

 

We hope you found this article useful in identifying the common features of good private REITs regardless of the strategy they choose to work with.

 




    

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