A Real Estate Investment Trust (REIT) owns a portfolio of income-producing real estate and is required to distribute at least 90% of its taxable income to shareholders — giving investors diversified property exposure without owning buildings directly.
Created by the REIT Act of 1960, REITs democratized real estate by letting investors buy shares in large, professionally managed portfolios. To maintain their pass-through tax status, REITs must distribute at least 90% of taxable income as dividends, which is why they are valued for income. REITs span every property type — apartments, industrial, retail, data centers, healthcare and more.
For the 1031 and DST investor, REITs matter in two ways. Non-traded REITs are the destination of many 721 UPREIT roll-ups, where DST interests are contributed for operating-partnership units. And the full liquidity spectrum — from direct property to DSTs to non-traded REITs to daily-traded public REITs — frames the central trade-off between control, diversification, and liquidity.
A REIT assembles a portfolio
The REIT acquires and manages income-producing properties across sectors and markets.
It distributes 90%+ of income
To keep its tax status, the REIT pays out most taxable income as dividends to shareholders.
You hold shares or OP units
Investors buy public shares for liquidity, non-traded shares for stability, or receive OP units via a 721 UPREIT contribution.
Liquidity by structure
Public REITs trade daily; non-traded REITs offer periodic, limited redemptions; OP units convert to shares after a holding period.
The real estate liquidity spectrum
Control and 1031 eligibility decrease as liquidity increasesDiversification
One holding spans many properties, sectors, and geographies, smoothing single-asset risk.
Income
The 90% distribution rule makes REITs a dependable source of real estate income.
Liquidity options
Public REITs offer daily liquidity; non-traded REITs trade some liquidity for lower price volatility.
721 UPREIT destination
Non-traded REITs can accept DST interests via a 721 exchange, extending tax deferral with diversification.
Not 1031-eligible
REIT shares are securities, not like-kind real property — you cannot 1031 exchange into or out of REIT shares.
Market volatility (public)
Public REIT prices move with equity markets and interest rates, sometimes apart from property values.
Limited liquidity (non-traded)
Non-traded REIT redemptions are periodic and can be gated, especially in stressed markets.
Rate sensitivity
REIT valuations and dividends are sensitive to interest-rate cycles.
Public REITs vs. non-traded REITs
| Feature | Public REIT | Non-traded REIT |
|---|---|---|
| Liquidity | Daily on an exchange | Periodic, limited redemptions |
| Price volatility | Higher (market-driven) | Lower (NAV-based) |
| Minimums | One share | Typically $1K–$25K+ |
| 721 UPREIT intake | Rare | Common |
| Valuation | Live market price | Periodic NAV |
| Best for | Liquidity & trading | Income & 721 roll-ups |
General comparison; specific REITs vary. Not investment advice.
