Public vs Private REITs: The Real Talk Nobody Gave Me Before I Lost Sleep Over This

Did you know that public REITs returned about 11.4% annually over the past 25 years, according to Nareit, while a chunk of private REITs have straight up frozen redemptions when investors wanted their money back? Yeah, that’s a real thing that happened, and it happened to people I know! I remember sitting at my kitchen table three years ago, coffee going cold, trying to figure out why my buddy Mike couldn’t withdraw his money from a private REIT even though he “needed it in an emergency.”

This stuff matters because REITs are supposed to be the easy button for real estate investing. No landlord headaches, no 2am plumbing calls. But public vs private REITs are honestly two totally different animals wearing the same costume, and picking wrong can genuinely mess up your financial plans.

What Even Is a REIT, Real Quick

A REIT, or real estate investment trust, is basically a company that owns or finances income-producing real estate. You buy a piece of it, you get a piece of the rental income and appreciation. Simple enough, right?

Well, sort of. The devil’s in the details, and those details split into two very different worlds.

Public REITs: The Ones You Can Actually Sell on a Tuesday

Public REITs trade on stock exchanges like the NYSE, just like Apple or Coca-Cola stock. I bought my first one, a healthcare REIT, back when I was still figuring this stuff out. Sold it two days later because I panicked over a market dip. Dumb move, but hey, I learned something valuable: liquidity is a blessing and a curse.

• You can buy or sell shares any day the market’s open
• Prices are transparent and update constantly
• They’re regulated by the SEC and have to file regular reports
• Dividends tend to be steady but share prices can swing hard with the broader stock market

That last point tripped me up for years. Even though the underlying real estate wasn’t doing anything crazy, my REIT shares would drop 8% because the whole market got spooked. Frustrating? Absolutely. But at least I could sell whenever I wanted, unlike poor Mike.

Private REITs: The Ones That Lock Your Money in a Vault

Private REITs don’t trade on public exchanges. You’re usually investing through a broker, financial advisor, or sometimes a crowdfunding platform like Fundrise. They’re often less volatile day-to-day because there’s no stock market drama attached, but that stability comes with a catch.

I got talked into a non-traded private REIT at a dinner party (never trust financial advice at dinner parties, lesson learned). The pitch sounded great: steady income, no market swings, exposure to commercial properties I’d never afford on my own. What they didn’t emphasize enough was the lockup period.

• Limited liquidity, sometimes years before you can cash out
• Less frequent reporting requirements, so transparency can be murkier
• Often higher fees and commissions built into the structure
• Valuations are less frequent, maybe quarterly, so you don’t really know what your investment is worth day to day

When redemption requests during a rough patch outpace what the REIT can pay out, they can suspend withdrawals entirely. This happened with some big-name private REITs in 2022 and 2023, and it made headlines in The Wall Street Journal. Mike’s situation wasn’t an isolated incident, it was part of a broader pattern.

So Which One Should You Actually Pick

Honestly? It depends on what you value more, liquidity or lower volatility. There’s no universally “correct” answer here, and anyone who tells you otherwise is probably trying to sell you something.

If you might need access to your cash on short notice, public REITs are the safer bet. If you’re investing money you truly won’t need for 5-10 years and you want to avoid watching stock-market-induced price swings, a private REIT could make sense. I personally lean public these days, mostly because that Mike situation scared me straight.

Also, don’t skip the fee structure comparison. Private REITs often charge upfront fees of 7-10%, sometimes buried in the fine print. Public REITs typically just charge an expense ratio if you’re buying through a fund, way more transparent.

A Few Practical Tips Before You Jump In

• Always read the prospectus, boring as it sounds, it saved me from a bad private REIT deal once
• Check the REIT’s track record through multiple market cycles, not just the good years
• Ask specifically about redemption policies and historical suspension events
• Diversify, don’t put all your real estate exposure into one REIT type
• Talk to a fee-only financial advisor who isn’t earning commission off the sale

Wrapping This Up Before I Go on Another Tangent

Public vs private REITs isn’t really about which one is objectively better, it’s about matching the investment to your actual life situation and risk tolerance. Both can play a legitimate role in a real estate portfolio, but you’ve gotta go in with eyes wide open about liquidity, fees, and transparency differences.

Make sure you customize any of this general info to your specific financial situation, and definitely loop in a professional before making big moves, especially with retirement money. Real estate investing should build wealth, not keep you up at night wondering if you’ll ever see your cash again.

If you found this helpful, swing by the Rent Yield Lab blog for more no-nonsense breakdowns on real estate investing, rental strategies, and all the mistakes I’ve made so you don’t have to repeat them yourself!