Real estate investing can help diversify your portfolio and gain exposure to the housing market. You can invest in real estate in many ways, including buying and managing a property yourself, investing in a public REIT, or buying shares of properties through a platform like Arrived.
Notably, each long-term rental property on Arrived is taxed as a REIT. This means that when you invest in an Arrived property, you get the same tax benefits that public REITs can pass on to investors.
Arrived offers investors a unique way to buy shares of rental properties and invest in real estate. While Arrived looks similar to a public REIT at first glance, a few key differences set it apart from a traditional public REIT.
Here's how Arrived differs from a public REIT, along with factors to consider as you decide whether it fits your investment goals.
Similarities
A real estate investment trust, or REIT, is a company that invests in and manages a variety of real estate assets. The REIT passes on tax benefits and dividends to its investors, who buy shares of the REIT the same way they’d buy into a mutual fund or ETF.
The REIT shields investors from the day-to-day headaches of researching, buying, managing, and even selling property. REIT investors only need to worry about purchasing shares and receiving dividends and appreciation over time rather than finding tenants or fixing plumbing leaks at 2 a.m.
Arrived long-term rental properties are each taxed as a REIT, allowing investors to get the same tax benefits they’d enjoy from a public REIT. This includes passthrough taxation and the Qualified Business Income deduction. And, of course, Arrived investors are able to benefit from the tax deduction of depreciation on the properties. Arrived investors will also receive passive income dividends over time as the individual properties generate a profit or are sold.
NOTE: Vacation rentals are considered ‘active’ income and, therefore, not REIT eligible. Please see your tax advisor for specific investment advice.
Another similarity is that both public REITs and Arrived offerings are subject to SEC requirements. Public REITs register their securities with the SEC, and Arrived's offerings are qualified with the SEC under Regulation A. Both must file ongoing reports with the SEC, giving investors access to information about how each investment is operating.
Public REITs and Arrived have a similar operating model. Both purchase properties with the intent to rent them to tenants and generate profits. Both models involve renting the property to generate income and holding it for long-term appreciation while passing tax benefits on to investors.
Differences
That said, there are differences to note when comparing Arrived with public REITs.
Number of Properties
Large REITs can hold thousands of different assets in their portfolios. While these usually fall into the same category (i.e., single-family homes, apartment complexes, or commercial buildings), the mix includes multiple property types. When investors buy shares, they may struggle to know exactly what they’re buying because there’s such a large pool of assets.
Investors usually don’t get many details about the properties, and they can't choose a specific one they like. These funds continually add new properties and sell existing ones. That means that what you invested in today may be very different from what you actually own tomorrow.
With Arrived, however, investors can choose how they want to invest. Individual property offerings let you buy shares of a single rental or vacation home and review each property's details before you invest. Arrived's funds, like the Single Family Residential Fund and the Real Estate Income Fund, offer exposure to a broader portfolio of properties or real estate-backed credit in a single investment.
In this way, Arrived aims to combine the accessibility of public REITs with more choice and transparency than direct investing.
Volatility
REITs are traded daily on the public stock market, so share prices can fluctuate throughout the day. When something affects the market as a whole, REIT share prices can drop in response, even if the underlying properties haven’t actually lost any value.
Since Arrived investments aren't traded daily on a public exchange, share values don't move with day-to-day stock market swings. Instead, share prices are updated periodically based on property valuations. This may appeal to investors who prefer a longer-term approach, though it also means shares are less liquid than publicly traded REITs, and property values can still rise or fall over time.
Liquidity and Dividend Yields
Arrived investments and public REITs also differ in liquidity and the returns they generate.
Public REIT shares trade on stock exchanges, so investors can generally sell them any time the market is open. This liquidity can be valuable for investors who may need access to their money quickly, but it also means share prices can move with broader market sentiment, not just the value of the underlying real estate.
Dividend yields on public REITs change as their share prices rise and fall. When the market bids prices up, yields fall; when prices drop, yields rise. As a result, what investors earn from a public REIT depends partly on stock market conditions when they buy.
For investors with a multi-year time horizon who don't expect to need quick access to their money, daily liquidity may matter less. Arrived investments are designed for longer-term holding, and shares are less liquid than public REITs. Investors should weigh how much liquidity matters to them against other factors, like the type of real estate exposure they want.
That said, Arrived does give investors a way to sell before the end of an investment period. Once you've held shares of an individual property for at least six months, you can list them on Arrived's secondary market, which opens for a one-week trading window each month. It adds flexibility to a long-term investment, though sales depend on buyer demand; shares may sell for less than the original investment, and transaction fees apply.
Summary
Buying shares of REITs can be a way to invest in real estate without the large upfront costs and day-to-day responsibilities of buying and managing a property yourself. For investors who want more say in where their money goes, platforms like Arrived offer another option. With Arrived, investors can choose specific rental and vacation homes to invest in, or get broader exposure through Arrived's funds, all without having to be a landlord or having share values tied to daily swings in the stock market.
The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. The views reflected in the commentary are subject to change at any time without notice. View Arrived’s disclaimers.
