3 Different Types of Real Estate Investment Funds and the Benefits of Each

Real estate investment funds, whether publicly or privately traded, are similar in many ways. At a high level, real estate funds provide investors with diversified exposure to commercial real estate and the potential for passive income.

But there are some important differences, too. How a real estate fund is structured is one such variable, and it can have important implications for investors. In this article, we take a closer look at REITs, open-end funds, and closed-end funds and explore the benefits of each.

Real estate investment trusts (REITs)

A real estate investment trust, commonly abbreviated as a REIT, is “a company that owns, operates, or finances income-producing real estate.”¹

REITs fall into several categories: they can be exchange-listed, unlisted, or private.¹

Specifically, an exchange-listed REIT is registered with the U.S. Securities and Exchange Commission (SEC) and trades on a public stock exchange. An unlisted REIT, also known as a public, non-listed REIT (PNLR), is similar to an exchange-listed REIT in that it is publicly registered with the SEC, but different in that it does not trade on an exchange.¹

Meanwhile, a private REIT is like a PNLR: it does not trade on a stock exchange. The biggest difference, though, is that private REITs are exempt from SEC registration and thus are typically only available to accredited investors.¹

To meet the SEC’s definition of an accredited investor under Rule 501 of Regulation D, investors must meet one of two financial criteria:

• The net worth test: A net worth (either individually or in combination with your spouse) of at least $1 million or more, excluding the value of your primary residence.²

• The income test: An annual individual gross income of $200,000 (or $300,000 in combination with your spouse) in each of the last two consecutive years, plus a reasonable expectation that you will earn at least as much in the current year.²

Whether publicly-traded, unlisted, or private, a REIT is required by law to distribute at least 90% of its taxable income to investors every year.³ Doing so exempts the REIT from taxation at the entity level. Instead, all profits and losses are passed on to the REIT’s investors directly.

How investors can benefit: The 90% rule, coupled with the fact that REITs own income-producing real estate, means that REIT investors can potentially benefit from a steady stream of passive income. Depending on the REIT’s dividend or distribution policy, investors can potentially receive monthly, quarterly, or annual income.

Structured as a REIT,⁴ the DLP Preferred Credit Fund targets monthly distributions and annual returns of up to 11% for accredited investors.

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Open-end real estate fund

An open-end fund, often referred to as an evergreen or perpetual-life fund, is a real estate investment fund that does not have a fixed end date.⁵

Instead, proceeds from the sale of real estate assets (or from the maturity of credit investments) are reinvested into new opportunities. This allows investors to remain fully invested at all times.

Investors in an open-end fund who do not have a need for current income can even reinvest their dividends or distributions back into their fund. This may potentially result in higher returns over time, since reinvested earnings may generate further earnings on their own and result in a compounding effect.

How investors can benefit: Open-end funds allow investors to stay invested for as long as they like, with redemptions based on their own timing rather than the fund’s lifecycle. Investors can also choose to reinvest dividends or distributions, or receive them in cash.

Accredited investors in DLP Capital’s sponsored evergreen funds can choose to receive or reinvest their preferred return distributions.

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Closed-end real estate fund

In contrast to an open-end fund, a closed-end real estate fund has a fixed lifespan.

These funds raise a specific amount of capital during the fund’s inception. Then, the fund is “closed” to new capital.

Closed-end funds typically have lifespans ranging from five to ten years.⁶ At the end of the fund’s lifespan, its real estate assets are sold, and the proceeds are distributed to investors.

This finite lifespan means that a closed-end fund’s investment team has a specific timeframe to execute their business plan.

For example, in a closed-end real estate equity fund, this may mean acquiring, improving, and eventually selling the underlying properties to generate a return for investors. Meanwhile, in a closed-end real estate credit fund, the investment team may focus on originating and managing loans for property acquisition, development, or refinancing—with the goal of generating returns through interest payments and principal repayment.

How investors can benefit: A closed-end fund’s fixed term gives managers a clear incentive to maximize the value of the fund’s portfolio within that timeframe. At the same time, the fund’s “closed” nature gives fund managers the opportunity to invest in less liquid and potentially higher-yielding assets without the pressure of having to invest new contributions or meet ongoing redemption requests.

FAQs

What is a real estate investment fund?

A real estate investment fund is a professionally-managed investment vehicle that pools capital from a large number of investors. Proceeds are then invested in a diversified portfolio of income-producing commercial real estate, either via equity or debt. Investors in real estate funds have the potential to receive ongoing passive income in the form of dividends or distributions, and may benefit from capital appreciation over time.

What is an evergreen real estate fund?

An evergreen real estate fund is a fund that does not have a fixed termination date. Instead, the fund reinvests proceeds from the sale of one deal into new opportunities. This structure allows investors to remain fully invested and contribute additional capital at their discretion.

Are evergreen funds closed-ended?

No. Evergreen funds are open-end funds, which means they allow investors to invest or redeem their shares on their own timing and do not have a fixed termination date.

How do real estate investment funds make money?

Real estate investment funds typically make money through the acquisition, management, and sale of income-producing real estate, or through interest and fee income generated via real estate-backed mortgages and other loans.

What are the three types of REITs?

There are three types of real estate investment trusts, or REITs: exchange-listed, unlisted, and private.

¹Guide to Public Non-Listed REIT (PNLR) Investing. NAREIT. July 2025.

²Regulation D—Code of Federal Regulations. National Archives. May 2025.

³The ABCs of REITs. RSM. July 2025.

⁴REIT effective January 1, 2023

⁵Assessing the benefits of open-end alternative investments. J.P. Morgan Asset Management. September 2024.

⁶A Guide to Closed-End Funds. The Investment Company Institute (ICI). April 2025.

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