SCOTTSDALE, Ariz. – Ask investors whether they own real estate, and many point to the REITs in their brokerage account. According to Tim Fergestad, PhD, founder of Scottsdale-based alternative investment firm Oak Street Assets, that answer reveals one of the most common misconceptions in personal finance.
“A public REIT is not the same as owning real estate. It is a real estate-flavored stock,” Fergestad says. “You do not own property. You own shares of a company that owns property. That difference changes how the investment behaves, how it is taxed, and what you actually hold.”
The distinction matters most for diversification. Investors often add real estate to reduce exposure to stock market swings. But because public REITs trade on exchanges, their prices can move with the same market sentiment affecting other stocks. During downturns such as 2008, the early-2020 market shock, and 2022, public REIT indexes fell sharply alongside the broader market, even while many underlying properties continued collecting rent.
“An index fund already spreads you across every sector, including publicly traded real estate,” Fergestad says. “A public REIT may add sector diversification, but it does not provide the same diversification as privately held real estate. You have added another publicly traded security, not an asset valued primarily through property operations.”
Taxation is another major difference. Ordinary REIT dividends are generally taxed as ordinary income, and the depreciation benefits generated by the underlying properties remain inside the REIT rather than passing through to shareholders. Direct and syndicated real estate investments, by contrast, can often pass depreciation benefits through to investors, while direct owners and property-owning entities may defer qualifying gains through 1031 exchanges, advantages unavailable to public REIT shareholders.
The structures also differ. Public REITs typically own broad portfolios and operate as publicly traded companies. Private real estate investments, including the multifamily syndications Oak Street Assets focuses on, generally follow a defined business plan for a specific property or portfolio, seeking to increase value through operations and execution rather than daily market pricing.
Fergestad notes that the trade-offs run both ways.
“Public REITs offer liquidity and low minimums, and that is worth something,” he says. “For money you might need next month, liquidity is a feature. For wealth you are building over decades, it can become volatility with better marketing.”
Oak Street Assets, whose investor base is roughly one-third physicians and medical professionals, invests alongside its partners and focuses on education before investment.
“Our thesis is simple. Freedom is built on assets: real buildings, real residents, and real income,” Fergestad says. “Knowing the difference is the first step.”
More information is available at oakstreetassets.com.
For educational purposes only; not investment, tax, or legal advice or an offer of any security.
Media ContactCompany Name: Oak Street AssetsContact Person: Dr. Tim FergestadEmail: Send EmailPhone: 480-225-9388Country: United StatesWebsite: https://oakstreetassets.com/
