In an article for MarketWatch, Brett Arends discusses the tradeoffs of traditional real estate investing vs REITs. While many people have built wealth by buying and renting homes, Arends believes that investing in REITs is a better option for most investors given costs and complications.

Additionally, the upside of real estate ownership is less appealing in an environment of higher borrowing costs. Many real estate investors are making the mistake of looking at returns over the past 30 years and projecting them forward. However, the last 30 years saw interest rates decline by a significant margin which is unlikely to be true over the next 30 years. 

REITs offer exposure to real estate as well and have outperformed home prices by about 3% annually. Currently, home prices remain elevated, while REITs are down 40% over the past year in many cases, leading to attractive yields and compelling value. 

Further, REITs are much more liquid and can be bought and sold instantly through any brokerage. In contrast, real estate transactions have massive costs and take time. Additionally, REITs are inherently more diversified than a real estate investment which means less risk. 

Finsum: Brett Arends discusses why the risk-reward equation currently favors REITs over traditional real estate investing given costs, value, and complexity.


In an article for SeekingAlpha, Armada ETF Advisors make the case for why public real estate is due to outperform vs private real estate given the gap in valuations. Over the last couple of years, the combination of the Fed’s rate hiking campaign and weakness in segments of the real estate market like commercial real estate have led to major drawdowns for publicly traded REITs. 

In contrast, private real estate has fared much better. According to Armada, these types of wide differentials in performance have been reliable indicators of mean reversion, historically. In addition to favorable valuations, the firm also believes that the headwind of higher rates is about to recede given trends in inflation and budding signs that a recession is imminent.

Over the last 2 decades, there have been 8 instances when REITs underperformed by more than 10%. Each instance was followed by a period of strong REIT performance in absolute and relative terms. 

It’s also a rare opportunity for investors to acquire high-quality real estate assets at cheaper prices than what is available in private markets. Typically, the situation is inverted given the greater liquidity of publicly traded REITs. 

Finsum: Private real estate has outperformed public real estate by a significant amount over the past year. But, it could be an indication that a major mean reversion is imminent. 


Two of the most common ways to invest in real estate are through REITs or private real estate. While both have similarities, there are some key differences in terms of structure, liquidity, access, risk, and return. 

REITs are similar to mutual funds in how they are traded and valued. However, they must derive 75% of their income from real estate investments and distribute 90% of taxable income to shareholders. There are a variety of REITs that encompass the whole industry such as retail, commercial real estate, senior housing, multifamily, office, etc. 

Unlike private real estate, there is no end date, and they can operate in perpetuity. Private real estate differs from REITs in that they tend to be pooled investment vehicles that give investors fractional ownership. 

While REITs must abide by strict tax laws, there is no similar requirement for private real estate. Another difference is that private real estate tends to not offer income. Instead, their goal is to pool capital to acquire and develop a property, hold it for seven to ten years, sell it at a profit, and return proceeds to investors with the operators taking a cut. 

Finsum: There are many ways to invest in real estate. Two of the most common are REITs and private real estate. Here are some key differences between both options. 


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