A non-traded REIT is a form of real estate investment method that is designed to reduce or eliminate tax while providing returns on real estate. A non-traded REIT does not trade on a securities exchange and because of this, it is quite illiquid for long periods of time. Front-end fees can be as much as 15%, much higher than a traded REIT due to its limited secondary market.


Early redemption of a non-traded REIT can result in high fees that can lower the total return. Like exchange-traded REITs, non-traded REITs are subject to the same IRS requirements that include returning at least 90% of taxable income to shareholders. Investors tend to seek exchange-traded and non-traded REITs for their income distribution.

Common Considerations When Investing in a Non-Traded REIT

Non-traded REITs could remain illiquid after their inception for up to eight years or even longer because they are not traded on national exchanges and may not have steady income at the beginning. Periodic distributions to shareholders of non-traded REITs may be largely subsidized by borrowed funds. Such distributions are not guaranteed to be paid and may exceed the REIT’s operating cash flow. The board of directors for the non-traded REIT can decide whether or not to pay a distribution and what amount will be given. When a non-traded REIT is just getting started, its earliest distributions might come entirely from the capital the investors put into it.

The expectation is that the REIT will eventually see income that is generated by the real estate it has invested in. This income would likely come from the properties through rent or hotel fees. The types of properties that a non-traded REIT invests in early on might be unknown to the investors. The initial property acquisitions might be made through a blind pool, where the investors do not know the specific properties that are being added to the program’s portfolio.

Despite not being listed on any national securities exchanges non-traded REITs must still be registered with the Securities and Exchange Commission. They are also required to make regular, periodic regulatory filings. This includes quarterly and annual reports as well as filing a prospectus.

Many non-traded REITs are structured with a finite timeframe built in before one of two actions must be taken. At the end of the period, the non-traded REIT must either become listed on a national exchange, or it must liquidate. The value of the investment made into such an REIT could have decreased or become worthless at the time the program is liquidated.


    REIT ETFs are exchange-traded funds that primarily invest in ...
  2. Infrastructure Trust

    Infrastructure Trust is a type of income trust to finance, construct, ...
  3. Energy Trust

    An energy trust is a type of corporation that exists solely to ...
  4. Income Trust

    An income trust is an investment trust that holds income-producing ...
  5. Commercial Property

    Commercial property is buildings and land that are intended for ...
  6. Operating Company/Property Company ...

    An operating company/property company (opco/propco) deal is a ...
Related Articles
  1. Financial Advisor

    Non-Traded REITs: Risks and Rewards

    An overview of the risks and rewards of non-traded REITs and how they compare to exchange-traded REITs.
  2. Investing

    The Appeal of Non-Traded REITs

    There are several reasons why non-traded REITs can be a more appealing investment than publicly-traded REITs.
  3. Investing

    REITs 101: How They're Regulated

    Here's everything you need to know about REITs in less than five minutes.
  4. Investing

    REITs vs. REIT ETFs: How They Compare

    Learn about the difference in investing in a REIT for a single real estate company versus investing in a REIT ETF that tracks a larger REIT index.
  5. Investing

    REITs As an Alternative to Real Estate Investment

    Does investing in real estate seem like too much maintenance? Consider the many advantages of REITs, or real estate investment trusts.
  6. Investing

    Are REITs Beneficial During A High-Interest Era?

    Historically, REITs have remained independent of interest rates, making them a good alternative to more sensitive stocks and bonds.
  7. Financial Advisor

    REITs: Why They're So Hot Right Now

    They've been substantially outperforming both stocks and bonds for the past several months.
  8. Investing

    REITs Could be Affected by Higher Interest Rates

    Learn how REITs may be impacted by an increase in interest rates, and understand why certain types of REITs could benefit from higher rates.
  1. What Are the Pros and Cons of Owning an Equity REIT vs. a Mortgage REIT?

    Learn about investing in equity, mortgage, and hybrid REITs. Explore the different strategies REITs employ to generate income ... Read Answer >>
  2. What is the difference between an Equity REIT and a Mortgage REIT?

    Find out more about real estate investment trusts and the main differences between equity and mortgage real estate investment ... Read Answer >>
  3. What are the main segments of the real estate sector?

    Understand what the three primary segments of the real estate sector are and the metrics used by investors and analysts to ... Read Answer >>
Trading Center