COMMERCIAL REAL ESTATE investment is best done as a group activity to spread risk. By owning multiple properties, each legally separated, a relatively safe element can be added to an investment plan.

There are publically traded REITs (real estate investment trusts), and there are REITs where investors of size can buy into a fund used to buy properties. The company managing this process offers REITs as the product they sell. They buy and sell properties that produce rental income for their fund shareholders. They charge the fund a management fee for this service.

Their expertise involves buying and sometimes selling properties at desirable market prices that produce steady rental income for their owners and that will appreciate over time. Acquiring mortgage funding for their purchases is part of the process. Private REITs cater to investment portfolios that seek a real estate component. These are often retirement funds or, in some cases, even sovereign funds.

Publically traded REITs are stock exchange listed and report earnings, as do all public companies. Their product is real estate investment services. They perform according to their skill levels and the ups and downs of the capital and property markets.

They are, in effect, mutual fund companies that operate exclusively in real estate investments. They are highly specialized in what they do. The value of a property and its ability to produce income is a relative determination. There is considerable judgment involved in each transaction.

REITs prosper on their performance. They are captive to both capital and property markets. Because they are asset backed, they are considered to be more secure by some than investments in pure equity or pure debt opportunities.

Most real estate investors are merely buying their own home. Some buy multifamily homes. Some buy a number of multifamily homes. Some invest in a commercial property. All this is done for appreciation and potential rental income. On a small scale, it makes sense to manage your own holdings. Scale all this up and REITs are what you have.

Jack Falvey is a frequent contributor to the Union Leader, Barron’s and The Wall Street Journal. He can be contacted at