Beware Non-Traded REITS

Non-traded REITs have been in the news lately, and not for good reasons.

In the portfolios we manage for clients, we often buy shares of publicly traded REITs (real estate investment trusts), REIT mutual funds and ETFs (exchange traded funds).  These invest in real estate, like shopping malls, apartment complexes, and office buildings, and can be bought or sold every day on the exchanges. That means their prices reflect current values. In addition, they are both very marketable and highly regulated, have reasonable management fees, and disclose the details of day-to-day operations via periodic reporting.

Non-traded REITs are a whole different story.  We have never purchased them for clients, but many of our clients were sold them by previous brokers and still hold them in their portfolios.  They do not trade on any exchange, are usually “priced” once per year, and are often difficult if not impossible to liquidate.

The annual “value” reported by brokers is often egregiously misleading, causing several non-traded REITs to plummet in value as long-hidden financial problems come to the surface. These investments are also plagued by high fees and sales commissions (reportedly reaching 10-15%), unsustainable dividend yields, and illiquidity concerns that make them unsuitable for many investors.


If you already own such an investment, it may be too late to do much about it. If you are offered such an investment, be aware that regulators have issued an “Investor Alert” related to their sale. As one attorney advises, don’t be a victim and ask about the “whopping commission” paid to recommend these products before you fall for the pitch.

About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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