The Difference Between Public and Private Real Estate Investing
Most investors are familiar with Real Estate Investment Trusts (REITs), which trade on public stock exchanges and offer easy access to real estate exposure. Fewer are familiar with the range of private real estate options available to accredited investors — including DSTs, private real estate funds, and direct syndications. Both approaches have their place. The right one depends on what you are trying to accomplish.
Public REITs: What They Are and How They Work
Publicly traded REITs are bought and sold on exchanges like any stock. They are highly liquid, require no minimum investment beyond the share price, and are accessible to any investor.
But that liquidity comes with a cost. Public REITs are subject to stock market volatility and tend to move with broader equity markets rather than reflecting underlying real estate fundamentals. During market downturns, REITs can fall significantly even when the underlying properties are performing well.
Private Real Estate Investments: What They Are and How They Work
Private real estate investments — including DSTs, private real estate funds, and syndications — are not traded on exchanges. They are illiquid, require accredited investor status, and typically have minimum investment thresholds.
In exchange for that illiquidity, private investments offer several potential advantages: lower correlation to public market volatility, direct ownership of real assets, more favorable tax treatment, and access to institutional-quality properties not available in public markets.
Tax Treatment: A Key Differentiator
This is where private real estate has a significant structural advantage for accredited investors. Private investments — particularly direct ownership and DSTs — offer depreciation deductions that can offset income distributions. They also qualify for 1031 exchange treatment, allowing investors to defer capital gains taxes when they exit.
REIT dividends are generally taxed as ordinary income and do not generate depreciation benefits in the same way. REITs cannot be used in a 1031 exchange.
Which Approach Is Right for You?
• Public REITs may be right for investors who prioritize liquidity, low minimums, and broad diversification.
• Private real estate may be right for investors who want tax efficiency, institutional-quality assets, and income that is less correlated to stock market movements.
• Many investors hold both — using public REITs for liquidity and private alternatives for tax-advantaged income.
How True North Private Investments Helps
At True North Private Investments, we specialize in private real estate alternatives — including DSTs and private real estate funds — for accredited investors who want institutional-quality exposure with meaningful tax advantages.
Final Thoughts
Public and private real estate are not the same investment — they behave differently, are taxed differently, and serve different purposes in a portfolio. Understanding those differences is the starting point for using each effectively.
Schedule a conversation with True North Private Investments to explore private real estate options.