Classification of REITs

What is a REIT?

Real Estate Investment Trusts (REITs), are pools of capital from investors that are used to purchase and finance real estate properties which are then leased. Usually, 90% of taxable income is paid to shareholders so that the REIT qualifies for preferential tax treatment. 

Public vs. Private REITs

Here are the differences and similarities between public and private REITs:

• Public REITs - Public REITs are traded on the stock exchange and so, they should be treated as traditional assets. They are subject to fluctuations in the market.
• Private REITs - Private REITs have the same favorable tax treatments as public REITs, but are sold only to accredited and institutional investors. These are not traded on a stock exchange and are therefore considered alternative assets.