Private Real Estate vs REITs: Which Builds More Wealth for Investors?
Published October 2026 | Awesome ROI Market Insights
Private real estate vs REITs is a question many investors ask when they want property exposure without being a landlord. Both let you invest in real estate passively. However, they behave very differently. In 2025, the FTSE Nareit All Equity REITs index returned just 2.27%, while the S&P 500 gained 17.88%, according to Nareit. So, is a public REIT really the same as owning real estate? So, here is how the two compare.
REITs Trade Like Stocks
First, a REIT is a company that owns real estate and trades on a stock exchange. That brings real benefits, for example daily liquidity and low minimums. However, it also means REIT prices move with the stock market. In fact, Nareit’s own research has found that equity REIT returns have historically had a correlation of around 58% with the broader stock market. For instance, in September 2026 alone, REITs fell 5.7% as bond yields rose, per Nareit. As a result, REIT investors often feel the same swings as stock investors.
Private Real Estate Means Owning Specific Properties
In contrast, with a private real estate investment, you invest in a specific property or group of properties. So, you can see the address, the tenants, and the business plan. In addition, sponsors usually offer private deals under Regulation D, as explained by the SEC. However, the tradeoff is liquidity. In practice, you typically cannot sell your interest whenever you want, and you commit your money for the full hold period. So, private real estate fits best for capital you will not need in the short term.
The Tax Difference Is Bigger Than Most People Think
Next, most REIT dividends are taxed as ordinary income. For dividends paid in 2025, about 79% counted as ordinary income, according to Nareit. A 20% deduction helps, but rates can still be high. On the other hand, private real estate partnerships pass depreciation through to investors on a K-1. In turn, that depreciation can offset some or all of the cash flow on paper. Because of this, two investments with similar cash returns can produce very different after tax results.
Private Real Estate vs REITs at a Glance
Here is a quick side by side look at private real estate vs REITs.
| Public REITs | Private Real Estate | |
|---|---|---|
| What you own | Shares in a company | An interest in specific properties |
| Pricing | Changes every trading day | Based on property income and appraisals |
| Liquidity | Sell any trading day | Committed for the hold period |
| Tax reporting | 1099-DIV, mostly ordinary income | K-1 with depreciation pass through |
| Who can invest | Anyone with a brokerage account | Often accredited investors |
| Visibility | Large, diversified portfolios | Clear view of each property and plan |
Private Real Estate vs REITs: Which Is Right for You?
Overall, REITs can make sense for investors who need liquidity and want broad exposure. On the other hand, private real estate may suit investors who want direct ownership, potential tax benefits, and less day to day price movement. In fact, many investors use both. At Awesome ROI, we offer private investments in Arizona properties that our own team operates. Browse our current offerings or read our guide to equity vs debt investing.
REITs move with the stock market. Daily pricing brings liquidity, but also volatility.
Private deals offer direct ownership. You know exactly which property you own and how it is run.
Taxes differ a lot. REIT dividends are mostly ordinary income, while private deals can pass through depreciation.
Liquidity is the tradeoff. Private investments require a longer commitment of capital.
Ways to Get Started
Compare a private deal against your current portfolio using our free IRR calculator. Many investors also move part of their retirement savings into real assets with a 401(k) or Self-Directed IRA. When you are ready, book a free investment strategy call.
Frequently Asked Questions About Private Real Estate vs REITs
Are REITs the same as owning real estate? REITs own real estate, but you own shares in a company that trades like a stock. Private real estate gives you an ownership interest in specific properties.
How are REIT dividends taxed? Most REIT dividends are taxed as ordinary income, though many qualify for a 20% deduction.
Who can invest in private real estate deals? Many private offerings are limited to accredited investors. Some allow a limited number of sophisticated non accredited investors.
This article is for educational purposes only and is not investment or tax advice.
Talk to Awesome ROI About Private Real Estate
So, if you want real estate that you can actually see and understand, we would love to talk. Schedule a call with our team, contact us, or call +1 (833) 652-7103.
