Real Estate Investment Trusts (REITs) vs. Syndication: What is the Difference?

by David Gerlitz on August 9, 2011

Real Estate Investment Trusts (REITs) vs. Syndication: What is the Difference? For investors looking for passive investments in Real Estate, choosing the right vehicle is kind of like going to the ice cream shop: they come in many different flavors and it can be difficult to choose.

Real Estate Investment Trusts (REITs) vs. Syndication:  What is the Difference?Most well-known are Real Estate Investment Trusts. REIT’s are typically divided into two categories: equity REIT’s and mortgage REIT’s. Most simply, Equity REIT’s invest in the underlying property while mortgage REITs invest in the note which secures the property.

Real Estate Investment Trusts are excellent vehicles for investors looking for liquidity, as the shares of public REIT’s are traded on public exchanges. In order to qualify as a REIT, companies must hold most of their assets in Real Estate and pay out at least 90% of their earned income to investors as dividends.

The drawback of public REIT’s is that they are exposed to broader market fluctuations. Even a REIT which is performing well can be punished unfairly when the overall market declines. You can learn more about REIT’s by clicking the link.

Another option for investors looking for passive investments is Real Estate Syndication. Rather than investing in a diversified class of properties, such as warehouses or shopping malls, syndicates are most often formed to purchase a single property. This allows investors to pool their money together to purchase a larger asset than they may be able to do on their own. It can also make it easier to analyze the underlying investment opportunity.

With today’s Real Estate investors finding it difficult to tap into traditional funding from banks, investors everywhere are looking for private funds to invest. A visit to your local Real Estate Investors Association will likely turn up a number of investors with good deals looking for private money to invest.

Related posts:

  1. What is Real Estate Syndication?
  2. Colorado Debt Investing or Equity Investing – What Is The Difference
  3. What Are Your Private Lending Real Estate Investment Options?
  4. Real Estate Syndication Colorado
  5. The ABCs of Land Trusts

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