A REIT, or real estate investment trust, is an entity that owns—and usually operates—income-producing real estate. Most REITs specialize in particular type of property: residential, industrial, commercial, retail, health care. Some REITs own real estate-related debt, like mortgages.
There are three types of REIT:
Characteristics of Private REITs
Private REITs are considered private placements, sometimes called “unregistered offerings.” This refers to the fact that private placements are not registered with the SEC and are not subject to many of the rules in place to protect investors. Because they are not traded on an exchange, it may be difficult to sell your interest when the time to sell comes.
Private REITS may be offered by private and public companies and hedge funds, among others. In the case of a private REIT, the entity owns—and usually operates—the real estate. The private REIT is likely to specialize in one kind of property: retail, residential, commercial, or industrial, for example. A private REIT may also be formed to finance a particular development, such as a shopping mall or apartment complex.
Important Reminders About Private REITs
Because private REITs are offered without some of the protections—such as disclosures and regular reports—that apply to investments that are registered with the SEC, it is very important to pay attention to the details and to talk with a qualified legal or investment advisor. Here are few things to look out for:
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