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Private REITs are one of the best asset classes for 2023, and these five will likely yield the most favorable returns.
Best for Beginners
Best for Passive Income
Best for Alt. Investments
Private real estate investment trusts (REITs) can make excellent investments, producing high yields and dividends. However, the choice can be overwhelming. Knowing what to look for and deciding which private REIT to invest in can be difficult.
Of the many options available, these five companies are the best private REITs to invest in during 2023.
Top 5 Best Private REIT Funds & Companies
- Fundrise – Editors’ choice
- RealtyMogul – Best for beginners
- Streitwise – Best for passive income
- Yieldstreet – Best for Alternative Investments
- Blackstone Real Estate Income Trust – Largest private REIT
When looking at private REIT companies, there are a few key metrics to consider when determining whether they are suitable investments. We looked at the following criteria:
- Dividend Ratio: Dividend ratios are a reliable indicator of how much a REIT is reinvesting into future growth and financial stability.
- Level of Risk: REITs should invest in stable, high-growth markets for an ideal blend of growth potential and security for their investors.
- Opportunities for Growth: The best private REITs will own properties (or be looking into owning properties) in key growth markets.
- Portfolio Diversity: A REIT portfolio will ideally boast properties in many regions and industries.
- Investment Strategy: The REITs on this list all have transparent investment strategies that will likely succeed in the 2023 landscape.
Fundrise – Editors’ Choice
Brandon Jenkins and Ben Miller founded Fundrise in 2012 with a view to increasing the accessibility of real estate investing, particularly in the private sector. They have achieved this goal — the minimum investment required to join Fundrise is just $10.
Fundrise’s highly diversified portfolio contains multi-family residencies, single-family home rentals and commercial real estate. As of the close of 2022, they manage in excess of $3 billion in assets and have distributed $226 million in dividends.
Best: Private REIT Funds
Why we chose Fundrise: Fundrise is a diversified company with strong leadership. In addition, it has consistently outperformed public REITs and other stock market options.
RealtyMogul – Best for Beginners
The current CEO of RealtyMogul, Jiliene Helman, founded the company after observing that most high-net-worth individuals had extensive investments in commercial real estate and decided that this area of investing needed an overhaul.
RealtyMogul has two REITs that accredited investors can choose from; both stipulate a minimum investment of $5,000. The first option that RealtyMogul offers is the Income REIT, which manages a strongly diversified portfolio with a return rate of over 9 percent in the last 12 months as of the end of 2022.
The second option is the Apartment REIT, which invests primarily in multi-family housing. This REIT also generates solid returns for investors, with a total asset value of more than $200 million.
Best: Income REIT
Why we chose RealtyMogul: RealtyMogul has historically yielded higher-than-average returns. The company has a diversified portfolio that includes property in many fast-growing markets.
Streitwise – Best for Passive Income
Streitwise was founded in 2017 and has not missed a dividend payment to date. These are, on average, above 9 percent. Streitwise aims to make real estate investing easy for everyone, and it has held true to this goal.
You do not need accreditation status to invest in Streitwise; you just have to be a qualified purchaser. Streitwise manages a diversified portfolio of real estate in a number of different industries, including healthcare, retail and warehouses.
Best: Dividend REIT
Why we chose Streitwise: Streitwise has a track record of excellent returns on investment (ROI) offerings, making it a great option for beginners because it does not require accreditation.
Yieldstreet – Best for Alternative Investments
Yieldstreet, a company founded in 2014, announced that it would be operating a Growth & Income REIT in 2022. Mitch Rosen, a highly experienced real estate investor, is heading the REIT.
The Yieldstreet REIT is new, meaning there isn’t a wealth of information on its historical returns. However, this also means it is an opportunity to get in on the ground floor of what is likely to be a large-scale real estate investment operation.
The new REIT already owns three large multi-family properties and plans to invest in other types of commercial real estate in the coming years. Yieldstreet’s REIT is open to accredited investors with a minimum initial investment of at least $5K.
Best for: Institutional Investments
Why we chose Yieldstreet: As a new REIT, investing in early 2023 will allow you to get in on a unique, fast-growing business opportunity.
Blackstone Real Estate Income Trust (BREIT) – Largest Private REIT
BREIT is one of the market’s most significant private REIT investments. Stephen A. Schwarzman founded Blackstone — the parent company — in 1985 and launched its REIT in 2016.
It has had an astonishing 15 percent annualized return over the last three years for its class I investors. BREIT also owns and operates $69 billion in assets.
BREIT’s investment strategy focuses on regions where market growth has historically outpaced inflation. It has a highly diversified portfolio with properties in multiple industries and a higher concentration of investments in stable property types.
Why we chose BREIT: BREIT is backed by Blackstone and a highly experienced team of real estate experts. Additionally, it has a portfolio of investments in key growth markets.
What Are Private REITs?
Private REITs are non-traded REITs that are not available to the general public. Both private and public REITs are realty companies that make money by owning or investing in income-producing real estate.
SEC registration is the primary functional difference between a private REIT and a public REIT. Private REITs are exempt from many SEC reporting requirements, which allows them to have lower operating overheads and spend more on acquisitions and paying back investors.
Private REIT vs. Public REIT
There are two primary types of REITs: private and public.
Public REITs can be traded (bought and sold on major stock exchanges) or non-traded. Private REITs are all non-traded. You must be accredited by the SEC to invest in private REITs.
Private REITs usually have higher payouts and dividends but less transparency. Public REITs have lower dividends but more transparency and liquidity.
Benefits of Private REITs
Private REITs have many benefits that make them superb investments if you can gain access.
High dividend yields – Private REITs tend to pay higher dividends than public REITs and stock options. In some cases, private REITs can have dividend yields as high as 8 percent.
Institutional quality assets – Institutional investors, like private REITs, are far more likely to own institutional quality assets than individual investors or public REITs.
These high-end properties can cost hundreds of millions of dollars — a level of financing that isn’t available to many smaller or public REITs.
Portfolio diversification – Most private REITs are invested in multiple regions and real estate types, which decreases volatility and risk for investors.
No market volatility – Private companies are not subject to the same market volatility as stocks. While stock prices can drop significantly due to fear of recession or market regulation, the illiquid nature of non-traded REITs means that share prices are not as much of a concern.
Fewer compliance costs – Private REITs and companies do not have as strict reporting requirements to the SEC as public companies. This allows private companies to save money on meeting compliance standards and performing due diligence.
These savings allow private REITs to reinvest more and thus payout more to investors in dividends.
Fewer taxes – While REITs are considered real estate companies, they are not required to pay corporate taxes as long as they reinvest their profits or distribute them to investors. The lack of taxes provides REITs with lots of extra funds for growth and maximizes distribution payments.
Risks of Investing in Private REITs
While private REITs offer many benefits over alternative investment opportunities, there are certain drawbacks that you should be aware of before you commit to investing.
Accredited investors only – The accreditation requirement is one of the most significant drawbacks to private REIT investment. Becoming an accredited investor requires either a net worth of $1 million or an income of at least $200K if filing alone and $300K if filing as a couple.
Lack of transparency – The absence of SEC registration and reporting requirements saves money, but it also means that investors do not have the same easy access to information as public companies.
Higher commissions – Private REIT shares cannot be bought and sold by the general public, meaning that you will need to go through a broker to invest. Because of this, investors in private REITs will end up paying higher commissions than investors who put their money into other types of assets.
Lack of liquidity – Publicly traded REITs are as easy to withdraw from as common stock because you can simply sell to any buyer on the market. Private REITs are not as easy to leave. You will have to wait for minimum investment periods to expire, and the REIT will have to buy you out.
Higher investment minimums – Stock prices for traded REITs can often be below $50. However, initial investment requirements for private REITs are much higher — usually above $1K and occasionally as high as $10K.
How to Invest in Private REITs
Investing in private REITs will require you to hire a broker and, in most cases, receive accreditation status from the SEC. If you’re investing significant sums of money, a broker is a good idea to help manage your portfolio regardless of whether or not you want to invest in private REITs.
A broker can help you structure your portfolio to suit your investment style and risk tolerance and can get you access to exclusive private investment opportunities, such as private REITs.
After you have decided on a broker and negotiated how you want to invest, your broker will guide you through the process of acquiring REIT equity.
- Private REITs have access to all institutional properties and new growth opportunities. This diversity makes them excellent investments in unstable markets, as 2023 may be.
- The five private REITs discussed here have had historically high total returns and have done well by their investors.
- You will need to go via a brokerage to invest in a private REIT, but an expert can assist you in customizing your portfolio to your needs.
Private REIT FAQs
These are the most frequently asked questions about private REITs.
Are private REITs a good investment?
Yes, private REITs are a good investment that can provide you with a diversified portfolio and significant cash flow.
Are private REITs better than public REITs?
In some ways, private REITs are better than public REITs because they offer higher yields and less volatility. However, private REITs are less transparent and often require higher initial investment.
What is the average return for a private REIT?
Private REITs usually have dividend yields of about 7-8 percent.