Which of the following characteristics is typically associated with direct real estate investments (e.g., owning an income-producing property) compared to publicly traded REITs?

Question: Which of the following characteristics is typically associated with direct real estate investments (e.g., owning an income-producing property) compared to publicly traded REITs?

Answer options:

• Higher liquidity and lower transaction costs
• Greater diversification benefits due to fractional ownership ✅ More direct control and potential for active management
• Lower correlation with interest rate fluctuations

Correct answer: More direct control and potential for active management

Explanation: Direct real estate ownership provides the investor with full control over the property, allowing for active management decisions related to tenants, maintenance, and potential improvements. REITs offer liquidity and diversification but limited direct control.