The duration mismatch inside a REIT position almost nobody calendars
I keep coming back to one specific problem with how people size REIT positions against a real estate deployment timeline. The assumption is usually that the REIT sleeve is liquid, so it can be sold whenever capital is needed elsewhere. That is true in one day, but the tax drag on a forced sale inside a year can be severe enough to change the deal math downstream, and almost nobody runs that number before they start. Take a position worth 40,000 dollars bought six months ago, now up 12 percent. Selling to fund a closing costs roughly 5,400 dollars in short-term gain at ordinary income rates for someone in the 37 percent bracket, versus about 1,300 dollars if the hold had crossed twelve months first. The REIT did its job. The calendar did not. The question worth asking before you build the sleeve is whether the deployment event you are holding liquidity for has a hard date or a soft window, because those two situations want different position structures entirely. A soft window can absorb a hold-to-long-term discipline. A hard date cannot, and the sleeve needs to be sized with that tax haircut already priced in, or you end up closing with less equity than the spreadsheet said. What is the actual timeline you are working around when you size a position like this?
