Make Passive Income with Non-Traded, Private REITs

Updated: Mar 10, 2021

A REIT stands for Real Estate Investment Trust. It has to pay 90% of its annual profits out to investors. This payment is called a dividend. Only 10% of its profits are permitted to be invested back into the company. These are run by organizations in charge of income-producing Real Estate, ranging from residential homes, office and apartment buildings to warehouses, hotels, health centers, kiosks and much more.


I've invested in many things over the years, but I have to say, PRIVATE REITs may be my favorite. Yet private REITs are largely unknown to most investors, unlike their more famous sibling public REITs, which have been trading on public exchanges like NASDAQ for decades. There's a very simple reason for this. Until the Jobs Act that was passed by Obama, only accredited investors were able to invest in private REITs, like the ones offered on Fundrise. Now anyone can invest in these wonderfully passive streams of income. This post will explain how to make money with these secret products.



Why REITs are better than stocks!


Investing in stocks can be quite aggravating sometimes. You can be rooting for a great company whose stock value continues to rise. Then boom! The whole market collapses and you've lost 25% of what you've invested. It may come back. It may not. After all, for years, analysts have been saying the market is extremely overvalued. All the traditional metrics demonstrate this. But that doesn't matter if we think someone else will buy the stock for more. How does it ever not feel like a ponzi scheme sometimes?


However, with real estate- and in this case, REITs, there's real, tangible proof of its value by how bad someone wants to live there. Can real estate be overpriced and overvalued? Of course, but at least it's an income producing asset. REITs pay a dividend- a payment to its investor. It shares in its profits. That's the kind of investment for me. And if consistent passive income is your goal, REITs may be the better investment for you.



What's the Difference Between Public REITs and Private REITs?


Pivate REITs, like those offered on Fundrise, Diversyfund and Realtymogul, are an even better investment than public REITs if you're looking for consistent, reliable passive income. A private REIT's principal investment is unlikely to change because it's not being traded on an exchange. For instance, Simon Property Group, Inc., which is the largest shopping mall operator in the U.S., is a REIT offered on public exchanges. During this current recession, it's stock price fell over 50%! However, my private REIT investments never budged and is still paying me an easy, annualized 8% dividend!


Other benefits of Private REITs include:


1) Private REITs are dependent on the actual appraised value of the Real Estate, which results in more stability. Unlike Public REITs whose stock prices move at the whim of shareholders.

2) You get to save more money with private REITs. There are lots of costs associated with public REITs, including the cost of a stock exchange listing, a regulatory compliance fee, banker fee etc. The share price of a private REIT does include all these administrative costs.

3. Private REITs can go for smaller opportunities and execute them in a timely manner. Often times, these opportunities yield amazing returns. Public REITs cannot execute on every opportunity.



MAJOR PRIVATE REITs


At the time of this writing, there are many platforms for investing in private real estate trusts. However, only a few have a long track record and offer opportunities to non-accredited investors. Basically, the companies listed below are trusted and available to anyone.


1) REALTY MOGUL: My fave of this bunch, RealtyMogul boasts it's one of the oldest real estate crowdfunding platforms. It has financed over $2 billion worth of property since its launch. Over 200,000 members are registered users. And RealtyMogul has paid over $172 million in dividends to those investors since 2013.


2) FUNDRISE: Established in 2010, Fundrise is now one of the trailblazers of online real estate crowdfunding. Specializing in residential real estate market, their funds include a myriad of single family homes. Like Realtymogul, expect an average annual dividend of 8%.


3) DIVERSYFUND: The DiversyFund's centerpiece is a growth REIT that is SEC-regulated. This REIT builds wealth by investing in cash-flowing apartment buildings. With a minimum investment of $500, non-accredited investors can expect a return of about 10% to 20% for each property. As it says on their website, "It is a medium-term fund designed to give investors exposure to private multifamily real estate through a portfolio of properties offering high potential for appreciation. Our focus is on long-term capital appreciation from the renovation and repositioning of these multifamily properties."


Here to Stay


Real estate will always be one of the best investments for the simple reason that they will never build anymore land on this planet. And considering the current economic climate, people are searching for solid passive income streams more than ever. Private REITs are here to stay for a long time.



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