In the evolving world of real estate investing, Real Estate Investment Trusts (REITs) offer a powerful way for both individual and institutional investors to gain exposure to income-producing properties—without the need to buy or manage real estate directly. However, not all REITs are created equal. One of the most important distinctions lies in whether a REIT is private or public.
In this comprehensive guide, we’ll break down the key differences between Private REITs vs Public REITs, including their benefits, risks, liquidity, returns, and tax implications to help you make informed investment decisions in 2025.
📌 What Is a REIT?
A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate. Investors can purchase shares in a REIT, similar to buying stocks, and earn returns through dividends and appreciation.
REITs typically invest in:
- Apartment buildings
- Shopping malls
- Office spaces
- Industrial warehouses
- Hotels
- Data centers
🧩 Types of REITs by Accessibility
| REIT Type | Access | Regulated By | Publicly Traded? |
|---|---|---|---|
| Publicly Traded REITs | Open to all | SEC | Yes |
| Public Non-Traded REITs | Open to all | SEC | No |
| Private REITs | Accredited investors only | Not registered with SEC | No |
This article focuses specifically on the difference between private REITs and public REITs (both traded and non-traded).
🔍 What Is a Private REIT?
A private REIT is not listed on a public stock exchange and is typically not registered with the Securities and Exchange Commission (SEC). These are often accessible only to institutional investors or high-net-worth individuals (HNIs) who meet accreditation criteria.
Key Features:
- No public reporting requirements
- Minimal liquidity (long lock-in periods)
- Lower transparency
- Potentially higher yields
- May focus on niche or high-risk real estate markets
🔍 What Is a Public REIT?
A public REIT is registered with the SEC and may be either publicly traded on stock exchanges (like NYSE or NASDAQ) or non-traded but still registered. Publicly traded REITs offer high liquidity, making them attractive for individual investors.
Key Features:
- Highly regulated and transparent
- Easy to buy/sell via brokerage accounts
- More diversified and lower minimum investments
- Dividend income often paid quarterly
⚖️ Private REITs vs Public REITs: A Side-by-Side Comparison
| Criteria | Private REITs | Public REITs (Traded) |
|---|---|---|
| Access | Accredited investors only | Anyone with a brokerage account |
| Liquidity | Low | High (trade like stocks) |
| Regulation | Limited (not SEC-registered) | Fully regulated by SEC |
| Transparency | Minimal disclosures | Full public reporting |
| Minimum Investment | Typically high ($25,000+) | As low as a few dollars |
| Dividend Yield | Potentially higher | Moderate, stable income |
| Valuation | Periodic or manual | Market-based (daily) |
| Fees | Higher, less transparent | Lower, publicly disclosed |
💰 Returns and Risks: Which Is More Profitable?
Private REITs:
- Can offer 8–12%+ annual returns
- Often invest in development projects or non-core assets (e.g., distressed properties)
- May offer higher upside—but with increased risk and illiquidity
Public REITs:
- Typically return 4–8% annually
- More stable, long-term income and lower volatility
- Offer daily price discovery and dividend reinvestment options
⚠️ Remember: higher returns in private REITs come with higher risks and a lack of liquidity.
🔒 Liquidity: A Key Differentiator
| Factor | Private REIT | Public REIT |
|---|---|---|
| Can you sell anytime? | ❌ No – may have a lock-in period | ✅ Yes – daily market trading |
| Who buys your shares? | Typically the REIT or new investors | Any market participant |
| Exit Timeline | 5–10 years typical holding period | Minutes to days |
For investors who may need access to their funds in the short term, public REITs offer significantly more flexibility.
🧾 Tax Treatment of REITs
Both private and public REITs are generally pass-through entities, meaning they don’t pay corporate income tax if they distribute at least 90% of their taxable income to shareholders.
Common Tax Considerations:
- Ordinary income tax on dividends (not capital gains rate)
- No depreciation benefits passed on in public REITs
- K-1 or 1099 forms used depending on REIT structure
🧠 Private REITs may offer more advanced tax strategies like depreciation deductions and tax-deferred exchanges.
🏛️ Regulatory Oversight
Public REITs:
- Must comply with SEC disclosure rules
- Submit quarterly (10-Q) and annual (10-K) reports
- Subject to market scrutiny and audits
Private REITs:
- No public disclosures required
- Governed by offering memorandums
- Prone to conflicts of interest if sponsors act as both operator and manager
👥 Investor Suitability: Who Should Invest in What?
| Investor Profile | Recommended REIT Type | Why |
|---|---|---|
| Beginner Retail Investor | Public Traded REIT | Low entry cost, high liquidity |
| Long-Term Wealth Builder | Either (based on goals) | Private REITs for high risk/high reward |
| Passive Income Seeker | Public REIT | Quarterly dividends, stability |
| Accredited Investor | Private REIT | Access to exclusive deals and structures |
| Retirement Investor (IRA) | Public REIT | Compliance and low-risk exposure |
📈 Trends in 2025: Where Are REITs Headed?
The real estate investment space in 2025 is shifting due to:
- Higher interest rates, impacting yields
- Digital real estate (data centers, logistics hubs) growing in REIT portfolios
- Private REITs increasingly offered through fintech platforms
- Public REITs focusing on ESG and sustainability investments
Both types of REITs are adapting to changing market dynamics, offering more customization, access, and diversification than ever before.
🧠 Key Pros and Cons of Each REIT Type
✅ Private REITs
Pros:
- Potentially higher returns
- Access to exclusive or off-market deals
- Often less market volatility
Cons:
- Illiquid (lock-in periods)
- Less regulated and less transparent
- High minimum investments
✅ Public REITs
Pros:
- Liquid and easy to trade
- Transparent and regulated
- Suitable for all investor levels
- Easy diversification via REIT ETFs
Cons:
- Exposed to market fluctuations
- Lower yield potential than private REITs
- May have less control over individual assets
🧮 Case Study: Real-World Performance Comparison
| REIT Type | 2020–2024 Average Return | Volatility | Liquidity |
|---|---|---|---|
| Vanguard Real Estate ETF (VNQ – Public) | 6.8% annually | Moderate | High |
| Fundrise eREIT (Private) | 9.2% annually | Low to moderate | Low |
📊 While Fundrise showed better returns, investors had to commit for 5+ years and couldn’t liquidate quickly.
✅ Conclusion: Which Is Better for You?
There’s no one-size-fits-all answer in the Private REITs vs Public REITs debate. Your choice should depend on your:
- Risk appetite
- Investment horizon
- Liquidity needs
- Accreditation status
- Return expectations
For most retail investors, public REITs offer a safe, regulated, and easy way to invest in real estate. Meanwhile, private REITs might be attractive to high-net-worth individuals seeking higher returns and willing to trade liquidity for exclusivity and potential upside.