Securitized real estate is real estate that is packaged and sold as a security and is therefore regulated by federal securities legislation enacted to promote fuller disclosures and provide for more suitable investments for the investor.
Securitized real estate maintains all the benefits of real estate but adds the disclosure of a security, and in addition removes the responsibility of property management. Because these offerings are structured and offered as securities, investors must be supplied with a private placement memorandum (PPM) before purchase. The PPM gives the offerings the disclosure and due diligence elements of a security.
Investment in real estate has always been attractive to investors for the tax advantages that are available through depreciation deductions, and also to provide portfolio diversification.
Ownership of real estate for investment purposes can provide the monthly income associated with debt instruments, together with the potential appreciation of equity. Many investors invest in real estate because they presently own real estate and desire to avail themselves of the deferral of capital gains tax through a 1031 exchange rather than pay the heavy tax bill necessary to transfer their capital into more liquid securities.
Securitized real estate maintains all the benefits of real estate but adds the disclosure of a security, and in addition removes the responsibility of property management.