Like stocks, bonds and mutual funds, public real estate investment trusts (REITS) can be traded daily and thus have high volatility as they are associated with the public markets. On the other hand, private real estate has shown historically low correlation to public markets thus providing better diversification. In today’s age where equity markets have increased in volatility and uncertainty, private real estate investing can provide opportunity for above average returns and cash flow without the ups and downs of a public security.
Another advantage of investing in private real estate would be the tax benefits associated with being a passive investor in the project or fund. Passive investors are limited partners (LP’s) who directly own a percentage of the real estate which creates tax benefits that are passed through to LP investors. These benefits have the ability to offset a percentage of the taxes owed from the return on the investment.