Public vs Private REITs: What's the Difference and Which Is Better?

Public vs private REITs differ in three fundamental ways: liquidity, volatility, and access. Public REITs trade on stock exchanges and can be bought or sold any trading day. Private REITs don't trade publicly, offer limited redemption windows, and typically require accredited investor status or platform-specific accounts. Neither type is universally "better" — they serve different roles in a portfolio, and understanding those roles helps you allocate intelligently.

How Public REITs Work

Public REITs are companies listed on the NYSE or NASDAQ that own and operate income-producing real estate. They file quarterly reports with the SEC, employ independent auditors, and meet strict governance requirements. You buy shares through any brokerage account just like buying Apple or Amazon stock.

The public REIT market includes roughly 225 companies with a combined equity market cap exceeding $1.3 trillion. Major names — Prologis (warehouses), Equinix (data centers), American Tower (cell towers), Realty Income (retail) — are large, well-capitalized businesses.

Public REITs must distribute at least 90% of taxable income as dividends. Average dividend yields hover around 3.5–5% in 2026, with total returns (dividends plus price appreciation) averaging 8–12% annually over long periods. For a deeper look at how REITs work, see our guide on REIT investing explained.

Advantages of Public REITs

Daily liquidity. Sell shares any trading day, typically at tight bid-ask spreads. No lock-up periods, no redemption queues.

Low minimums. Buy one share for $15–$150, or invest in REIT ETFs like VNQ starting at the share price.

Transparency. Quarterly SEC filings, analyst coverage, and publicly available financial data. You can track FFO, occupancy rates, debt levels, and management compensation in real time.

Diversification. A single REIT may own hundreds of properties. REIT ETFs hold 100–200 REITs across every property sector.

Disadvantages of Public REITs

Volatility. Public REITs trade like stocks and correlate with the stock market in the short term. In 2022, the FTSE Nareit All Equity REITs Index fell 25% even though underlying property values declined only 5–10%. This disconnect between stock price and property value frustrates investors seeking stable real estate returns.

Emotional behavior. Because you can sell any day, you will be tempted to sell during downturns. Many investors buy high and sell low with public REITs — the same behavioral trap that plagues stock investors.

Premium/discount to NAV. Public REITs trade at prices that diverge from the value of their underlying properties. In bullish markets, REITs may trade at 20% premiums to NAV. In downturns, discounts of 15–30% are common. You might buy $100 of real estate for $120 — or $70 — depending on market sentiment.

How Private REITs Work

Private REITs (including non-traded REITs) raise capital directly from investors rather than through public stock exchanges. They register with the SEC under Regulation A or operate under Regulation D exemptions. Platforms like Fundrise, Streitwise, and DiversyFund offer non-traded REITs to retail and accredited investors.

Private REITs report net asset value (NAV) periodically — quarterly or monthly — rather than having a market-determined price. This NAV smoothing eliminates the daily price swings of public REITs but also masks real-time market movements.

Advantages of Private REITs

Reduced volatility. NAV-based pricing doesn't bounce with stock market sentiment. A private REIT's value might decline 5% during a downturn while public REIT stocks drop 25% — even if they own similar properties. This smoothing isn't fictional: appraisal-based values genuinely move slower than market prices. But it's also not magic: the underlying property values eventually converge.

Behavioral benefits. Because you can't sell on a whim, you're less likely to make emotional decisions. The illiquidity acts as a commitment device, keeping you invested through the downturns that generate long-term returns.

Access to different strategies. Private REITs can pursue concentrated or niche strategies (value-add multifamily, build-to-rent, specific geographic markets) that are too small or specialized for public REITs. Some private REIT structures blend debt and equity strategies for more consistent income.

Lower correlation to stocks. Academic research shows private real estate returns correlate 0.1–0.3 with stock returns over long periods, compared to 0.5–0.7 for public REITs. This makes private REITs a better diversifier in most portfolio contexts.

Disadvantages of Private REITs

Limited liquidity. Most private REITs offer quarterly or monthly redemption windows, subject to caps. Fundrise allows redemptions with potential penalties for short holding periods. Other funds gate redemptions at 5% of NAV per quarter — meaning if too many investors want out simultaneously, you wait.

Higher fees. Private REITs typically charge management fees of 1–2%, plus potential acquisition, disposition, and performance fees. Total fee drag can reach 2–4% annually, compared to 0.07–0.12% for public REIT ETFs.

Less transparency. While SEC-registered non-traded REITs file reports, the depth of disclosure doesn't match public REITs. Analyst coverage is nonexistent. You rely on the fund manager's reporting, which may emphasize favorable metrics.

Valuation uncertainty. NAV calculations depend on appraisals and models, not market transactions. Appraisals lag reality by 3–12 months. During the 2022–2023 real estate correction, some private REITs maintained stable NAVs while public REITs fell sharply. Both were partially right — but neither perfectly reflected real-time property values.

Performance Comparison

Over 20+ year periods, public and private REITs have delivered similar total returns — roughly 8–12% annualized. The paths differ dramatically:

Public REITs deliver lumpy returns. Up 30% one year, down 25% the next. The ride is volatile, but the destination is similar to private REITs.

Private REITs deliver smoother returns. Up 8% one year, up 6% the next, flat the following year. Less exciting, but easier to hold through market cycles.

The key insight: public REIT volatility is largely a feature of the stock market, not of the underlying real estate. If you can ignore the stock price and hold for 10+ years, public REITs deliver real estate returns at dramatically lower fees.

For a more detailed breakdown of how these structures compare, read real estate crowdfunding vs REITs.

Which Should You Choose?

Choose Public REITs If:

• You want liquidity and the discipline to not sell during downturns
• You prefer minimal fees (REIT ETFs charge 0.07–0.12%)
• You want broad diversification across property types and geographies
• You're investing in tax-advantaged accounts (IRA/401k) where volatility is less relevant

Choose Private REITs If:

• You want reduced portfolio volatility and don't need liquidity
• You're willing to pay higher fees for smoother returns
• You want access to niche strategies unavailable in public markets
• You're building a diversified alternatives allocation alongside stocks and bonds

Choose Both If:

• You have enough capital to split between liquid and illiquid allocations
• You want public REITs for your tax-advantaged accounts and private REITs in taxable accounts (where smoother NAVs simplify tax planning)
• You understand that combining both creates a more complete real estate allocation

The Fee Gap Matters

A public REIT ETF charging 0.10% annually versus a private REIT charging 2.5% creates a 2.4% annual drag. Over 10 years on a $100,000 investment earning 9% gross returns, that fee difference costs approximately $30,000. The private REIT must deliver meaningfully better gross returns — through superior deal selection, less volatility, or genuine alpha — to justify the higher cost.

Always compare net-of-fee returns, not gross returns. A private REIT showing 11% gross returns is not outperforming a public REIT ETF showing 9% gross returns — they're roughly tied after fees.

Frequently Asked Questions

Are private REITs safer than public REITs?

Not inherently. Private REITs appear less volatile because they use NAV-based pricing instead of daily market pricing. The underlying real estate risk is similar. A private REIT invested in office buildings faces the same tenant demand challenges as a public office REIT. The stability you see in private REIT values is partly real (appraisal smoothing) and partly an illusion.

What is the minimum investment for private REITs?

Minimums vary widely. Fundrise starts at $10. Streitwise requires approximately $5,000. Institutional private REITs may require $25,000–$250,000 and accredited investor status. The low-minimum platforms have made private REIT exposure accessible to virtually any investor, eliminating what was once a major barrier.

Can I hold private REITs in an IRA?

Yes. Most private REIT platforms support IRA investments through self-directed IRA custodians or proprietary IRA partnerships. This is tax-efficient because REIT dividends are taxed as ordinary income — sheltering them in an IRA (especially a Roth IRA) eliminates or defers that tax. Check platform-specific IRA procedures before investing.

How are private REIT dividends taxed?

The same as public REIT dividends — as ordinary income, not qualified dividends. The Section 199A deduction may allow you to deduct up to 20% of REIT dividends, reducing the effective tax rate. Check current law on whether this provision has been extended beyond its original expiration date. Private REIT investors receive 1099 or K-1 forms annually.

How long should I hold a private REIT?

Plan for at least 3–5 years. Most private REITs impose early redemption penalties within the first 1–3 years, and quarterly redemption caps may delay your exit even after the penalty period ends. A 5–10 year holding period aligns with the investment strategy and allows the fund manager to execute their business plan without forced liquidations.

What happens if a private REIT stops allowing redemptions?

The fund continues operating, but you cannot sell your shares until redemptions reopen. This happened to several large non-traded REITs in 2022–2023 when redemption requests exceeded caps. Your investment isn't lost — you still own shares and receive dividends — but you cannot access your principal. This risk is the core trade-off of private REIT investing.

ModernAlts is an independent research platform. Nothing in this article constitutes investment, legal, or tax advice. Alternative investments involve risk including possible loss of principal.