BUYING AND OWNING REAL ESTATE: PUBLIC EQUITY

Public equity is made up of real estate securities such as standard equity REITs or publicly traded real estate operating companies. Because investments are traded on a stock exchange, they tend to exhibit return patterns that are similar to equities, even though the underlying assets are real estate.


At any point in time, these public securities will be trading at a discount or a premium to their net asset values (NAVs), meaning that the value of the company is different than the sum of the underlying real estate values. This occurs as a result of the stock market valuation of these securities, which incorporates things like investor sentiment and psychology. It is important to be aware of this characteristic when making an investment in a real estate security because such investments can perform very differently than the underlying real estate that these public companies own.


One of the benefits of buying a security is the relative ease of acquisition. You buy it in the same manner as you would buy a stock - phone your broker, make the order and pay the relevant commission. You also achieve good liquidity with these investments, because they can be sold on short notice into the market with none of the usual delays that take place in the private market.


Source: Ian Woychuk, Investopedia.com