An equity REIT generally has the most operating and financial flexibility compared to direct investments in single properties or REOCs due to the benefits of diversification, professional management, and liquidity through the stock market.
Between direct investments in a single property, equity REITs (Real Estate Investment Trusts), and REOCs (Real Estate Operating Companies), an equity REIT tends to have the most operating and financial flexibility. Equity REITs pool the capital of many investors to own and, in most cases, operate income-producing real estate. Investors in an equity REIT benefit from diversification, professional management, and the ability to buy and sell shares relatively easily in the stock market, granting greater liquidity compared to a direct investment in a single property. REOCs also offer more flexibility than a direct investment because they can invest in a broader portfolio of assets and are not required to distribute as much income as REITs, which allows them to reinvest more of their earnings. However, REITs typically distribute at least 90% of taxable income to shareholders, enhancing their financial flexibility through consistent cash flows, which may not be as immediately accessible with a direct investment or a REOC.