There are pros and cons to investing in real estate through the public markets versus private through individual ownership in real estate. In the marketplace for publicly treaded REITS, for better or worse, the market values the investment every day based upon many factors that affect the capital markets very broadly. In buying an individual asset, the value is not determined every day but only by the real estate marketplace when you are ready to sell it. The cash flow you receive is direct result of you own success in the leasing, management and operation of the property. Public valuations move up and down with the market as a whole and often are disconnected to the value of the underlying real estate the company owns. Today, most REITs are trading at a 20 percent to 30 percent discount to net asset value (what the underlying real estate is worth based on a private sale of the individual real estate assets). The biggest difference is the complete liquidity of the public markets. In a publicly traded REIT, if there is any reason you need to sell or want to exit immediately due to rapid changes in the market, you can sell immediately. In privately held real estate, it would take months to implement a sale, so the immediate liquidity of public REIT stock is a big advantage. In a public REIT, you are investing in a collection of assets, a strategy and a management team. In a private deal, you are investing in one asset and your own implementation of a plan to maximize its value. Neither is necessarily a better choice, but each has clear benefits and drawbacks.
