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REIT vs. Real Estate Fund: What’s the Difference?

Rebecca Dawson
Silber Bennett Economic, Los Angeles, CA

A REIT is actually like a stock. It trades publicly on an exchange, and it must meet the SEC requirement that it disseminates at least 90 percent of its taxable income to shareholders, which is why REITs appeal to income-oriented investors. In contrast, a seclusive real estate fund is like a mutual fund. Since they don’t trade, they are pretty non-liquid. While they yield some income, their main aim is appreciation, realized when they sell their holdings.

Not to confuse the outgoing, but there are also private REITs. They pay monthly or quarterly distributions, have a stated redemption date and rebuke with warrants attached to the company’s common REIT stock. Since they don’t trade on the market, they are not as variable as public REITs, and they also offer some appreciation potential via the warrants.

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