Liquid real estate investment trusts (REITs) are pooled investments that allow investors to invest in a diversified portfolio of real estate properties. These REITs are publicly traded on major stock exchanges, making them more liquid than other real estate investments. Investors can easily buy and sell shares of liquid REITs, providing a more accessible way to invest in real estate.
Which of the following best describes a liquid REIT?
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A) A private real estate investment trust is not publicly traded, making it less liquid. B) A direct investment in real estate properties is not a pooled investment vehicle like a REIT. C) A liquid REIT is a real estate investment trust publicly traded on a stock exchange, making it more accessible for investors. D) A mutual fund that invests in real estate is a different type of pooled investment vehicle, not a REIT.
What is a key advantage of investing in a liquid REIT compared to a direct real estate investment?
A) Investing in a liquid REIT provides diversification, reducing risk compared to a direct real estate investment. B) Investors in a liquid REIT do not need to manage properties themselves, as the REIT handles property management. C) Both A and B are key advantages of investing in a liquid REIT compared to a direct real estate investment. D) Both A and B are advantages of investing in a liquid REIT.
Which of the following is NOT a characteristic of a liquid REIT?
A) A liquid REIT is publicly traded on a stock exchange, making it more accessible for investors. B) A liquid REIT invests in a diversified portfolio of real estate properties, reducing risk for investors. C) Investors in a liquid REIT do not need to manage properties directly, as the REIT handles property management. This is not a characteristic of a liquid REIT. D) A liquid REIT typically pays dividends to shareholders from profits generated by the properties in its portfolio.
In the early 2000s, the popularity of liquid REITs increased as investors sought more accessible ways to invest in real estate. This growth in demand led to new liquid REITs, providing investors with a wider range of options for investing in real estate.
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Example Series 65 Example Practice Question
An investor who wants to invest in real estate but does not have the capital or expertise to purchase properties directly might choose to invest in a liquid REIT. By purchasing shares of the REIT, the investor can gain exposure to a diversified portfolio of real estate properties without the need to manage the properties themselves.
Liquid REITs are neat, a real estate treat, with shares you can trade, and profits well-made.