Types of REITs: Equity, Mortgage, Hybrid, Public, Private, and Non-Traded

There are six main types of REITs, split along two dimensions: what they invest in (equity, mortgage, or hybrid) and how they're sold (public, private, or non-traded). Understanding these distinctions is the difference between earning 4% and 12% — and between selling your position tomorrow or waiting five years.

A REIT (Real Estate Investment Trust) is a company that owns, operates, or finances income-producing real estate. REITs must distribute at least 90% of taxable income as dividends, which is why they're popular income investments. But the term "REIT" covers wildly different risk and return profiles depending on which type you choose.

Types of REITs by What They Own

Equity REITs

Equity REITs own and operate physical properties — apartments, offices, warehouses, malls, data centers, cell towers. They make money from rent and property appreciation. About 90% of all REITs are equity REITs.

An equity REIT that owns 50 apartment buildings collects rent from thousands of tenants, pays operating expenses, and distributes the remaining income to shareholders. If the properties appreciate, shareholders benefit when the REIT sells or gets revalued.

Historical returns for equity REITs have averaged roughly 10-12% annually over the past 30 years (total return including dividends). The FTSE Nareit All Equity REITs Index is the standard benchmark.

Mortgage REITs (mREITs)

Mortgage REITs don't own buildings. They lend money to property owners or buy mortgage-backed securities. Their income comes from the spread between their borrowing costs and the interest they earn on mortgages.

mREITs typically offer higher dividend yields — often 8-14% — but come with more risk. They're heavily leveraged (borrowing $5-8 for every $1 of equity is common) and highly sensitive to interest rate changes. When rates spike unexpectedly, mREIT prices can drop 20-40% fast.

Annaly Capital Management (NLY) and AGNC Investment are the largest public mREITs. They're volatile and behave more like financial stocks than real estate.

Hybrid REITs

Hybrid REITs combine equity and mortgage strategies, owning properties while also holding mortgage debt. They're relatively rare. The diversification sounds appealing in theory, but in practice most investors are better off allocating separately to equity REITs and mREITs in proportions they control.

Types of REITs by How They're Sold

This is where the differences get more consequential for individual investors. The same type of real estate can look completely different depending on the wrapper.

Public Traded REITs

Public REITs trade on stock exchanges like any other stock. You can buy shares of Prologis or American Tower through any brokerage account. Liquidity is instant — you can sell any trading day.

The downside: public REITs trade with the stock market. During the 2022 sell-off, public REITs dropped roughly 25% even though the underlying properties kept generating rent. You're buying real estate economics wrapped in stock market volatility.

Public REITs are best for investors who want real estate exposure with daily liquidity and don't mind the price swings.

Private REITs

Private REITs aren't registered with the SEC and are only available to accredited investors (generally $200,000+ income or $1 million+ net worth excluding primary residence). They don't trade on exchanges, so their pricing reflects actual property values rather than stock market sentiment.

Private REITs have historically outperformed public REITs on a risk-adjusted basis, partly because they avoid the volatility drag of daily trading. Fundrise pioneered making private-REIT-like structures accessible to non-accredited investors through Regulation A+ offerings.

The tradeoff is liquidity. You typically can't sell private REIT shares on demand. Lock-up periods of 1-5 years are standard. For a deeper comparison, read our guide on public vs private REITs.

Non-Traded REITs

Non-traded REITs are registered with the SEC (unlike private REITs) but don't trade on exchanges (unlike public REITs). They sit in the middle.

Non-traded REITs have a troubled history. In the 2010s, many charged front-end loads of 10-15%, meaning your $10,000 investment immediately became $8,500 of actual real estate exposure. Commissions went to the brokers who sold them.

The newer generation — including offerings from Fundrise and Streitwise — has dramatically lower fees (typically 0.5-2% annually with no front-end load). These are worth considering. But always check the fee structure before investing in any non-traded REIT. If the front-end commission exceeds 3%, walk away.

Types of REITs by Property Sector

Within equity REITs, the property type matters enormously. Here are the major sectors:

| Sector | Example Companies | Typical Yield | Key Driver | |---|---|---|---| | Residential (Apartments) | AvalonBay, Equity Residential | 3-4% | Population growth, housing demand | | Industrial (Warehouses) | Prologis, Duke Realty | 2-3% | E-commerce growth | | Data Centers | Equinix, Digital Realty | 2-3% | Cloud computing, AI | | Cell Towers | American Tower, Crown Castle | 2-3% | 5G expansion, data usage | | Healthcare | Welltower, Ventas | 4-5% | Aging population | | Retail (Malls) | Simon Property, Macerich | 5-7% | Consumer spending | | Office | Boston Properties, Vornado | 5-8% | Remote work trends (headwind) |

Lower yields generally indicate higher growth expectations. Data centers yielding 2% are priced for strong appreciation. Office REITs yielding 7% reflect market skepticism about future demand.

How Different Types of REITs Perform

The performance gap between REIT types is significant. Over the 20 years ending 2025:

• Equity REITs returned roughly 9-11% annually (total return)
• Mortgage REITs returned roughly 4-6% annually despite higher dividends, because principal losses offset income
• Private REITs on platforms like Streitwise have targeted and often delivered 8-10% net annual returns with lower volatility than public equivalents

The lesson: high dividend yield alone doesn't mean high total return. mREITs have paid 10%+ dividends for years while losing principal value. Total return (dividends plus price change) is what matters.

For a complete breakdown of REIT mechanics, see our REIT investing explained guide.

How to Choose the Right Type of REIT

Your choice depends on three factors:

Liquidity needs. If you might need the money within a year, stick to public traded REITs. If you're investing for 3+ years, private or non-traded REITs offer better risk-adjusted returns without the stock market noise.

Income vs. growth. High-yield mREITs and office REITs pay big dividends but offer less appreciation. Data center and industrial REITs pay small dividends but grow faster. Match the type to your goal.

Risk tolerance. mREITs can lose 30% in a quarter. Diversified private equity REITs rarely drop more than 5-10% in a bad year. Public equity REITs fall somewhere in between.

Frequently Asked Questions

What is the safest type of REIT?

Diversified equity REITs that own multiple property types across many geographies are the safest. Non-traded equity REITs from established operators like Fundrise and Streitwise add stability by avoiding daily market pricing. Avoid concentrated single-property REITs and highly leveraged mortgage REITs if safety is your priority.

Which type of REIT pays the highest dividends?

Mortgage REITs (mREITs) pay the highest dividends, typically 8-14% yields. But high dividends can be misleading — mREITs frequently cut dividends and lose principal value during rate shocks. On a total return basis, equity REITs have outperformed mREITs over most long-term periods despite lower yields.

Are non-traded REITs a bad investment?

Legacy non-traded REITs with 10%+ front-end loads were genuinely bad products. Modern non-traded REITs from platforms like Fundrise and Streitwise charge much lower fees and have delivered competitive returns. Read the fee disclosure carefully. If total annual fees exceed 2% or there's a front-end load above 3%, skip it.

Can I buy REITs in a retirement account?

Yes. Public REITs work in any IRA or 401(k). Private and non-traded REITs can be held in self-directed IRAs. Since REIT dividends are taxed as ordinary income, holding them in tax-advantaged retirement accounts is tax-efficient. This avoids the annual dividend tax drag.

How many types of REITs should I own?

Two to three types of REITs provide adequate diversification for most investors. A reasonable mix: 60-70% in diversified equity REITs (public or private), 20-30% in a specific sector you believe in (like data centers or industrial), and 0-10% in mREITs if you want extra income.

What's the difference between a REIT and real estate crowdfunding?

A REIT is a legal structure — a company that owns real estate and passes through income. Real estate crowdfunding is a distribution method — raising money online from many investors. Many crowdfunding platforms like Fundrise actually structure their offerings as REITs. The terms overlap but aren't interchangeable.

ModernAlts is an independent research platform. Nothing in this article constitutes investment, legal, or tax advice. Alternative investments involve risk including possible loss of principal.