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CS Professional · Strategic Management and Corporate Finance · Real Estate Investment Trusts

Which feature distinguishes a REIT from a direct investment in a rental property by an individual?

A REIT gives investors small, liquid, listed units representing a diversified portfolio of professionally managed properties, whereas direct ownership needs large capital, is illiquid and concentrated in one asset. Unitholders do not manage leasing, and REIT units are tradable on exchanges.

  1. AREIT units give fractional, liquid exposure to a diversified pool of professionally managed properties, while direct ownership is lumpy and illiquidCorrect
  2. BREIT investors control day-to-day leasing decisions of each property
  3. CREIT units cannot be traded after allotment
  4. DDirect ownership always yields a lower risk through diversification

Explanation

REITs allow small investors to buy listed units of a diversified, professionally managed portfolio, giving liquidity and low ticket size. Unitholders do not control leasing, units are tradable on exchanges, and a single property is less diversified.

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