Defining Non-Traded Public REITs

Let's get more specific.

Our last blog post covered the basics of REITs and why REITs Give You More Options when investing for income and capital preservation. However, given the breadth of the countless REITs available, we concluded without breaking down the specifics of the various sub-types. So, through today's post, we will explore non-traded public REITs.

What is a non-traded public REIT?

With classic stocks, investors can purchase and sell ownership shares during market hours wherever they please. If the economy is booming, investors can cash out. If the economy is sagging, investors can move to the sidelines and wait volatility out.

Publicly traded REITs work identical to stocks and hence often fall into the category of equity investments. Their high liquidity and ease of purchase give any investor access to the real estate market fast and in (relatively) any dollar amount they want.

Contrastingly, with non-traded REITs, investors cannot log in to their brokerage accounts for trading. Instead, they often must be purchased through an intermediary like a broker or advisor, who will receive monetary compensation for selling them. Additionally, non-traded REITs have minimum purchasing requirements that usually start around $2,500 and minimum holding requirements of several years.

Why choose a non-traded REIT?

Given their less flexible nature, why would anyone invest in a non-traded public REIT? Well, since anyone can gain access to their publicly traded brethren without holding requirements, the risk to reward potential is generally lower.

Non-traded REITs, on the other hand, can offer unique investment opportunities that have the potential to yield higher returns and distributions. After all, when investors take on more risk, they expect a greater return. Still, nothing is guaranteed.

For those with no urgent liquidity needs and wanting to invest in more specialized areas of real estate passively, non-traded public REITs can be of value. Further, they are regulated by the SEC just like their publicly traded peers.

Are non-traded public REITs right for you?

Every investor is different due to their life circumstances and goals. While publicly traded REITs are more suitable for everyday investors, non-traded REITs serve a subset of investors looking for something more.

For these individuals, weighing the alternatives and costs of a non-traded public REIT is essential and requires due diligence.

At Lundeen Abrams Advisors, we recognize that some clients have unique goals and investment interests that intersect well with non-traded REITs, which is why we recommend them on occasion. If you are interested in a non-traded public REIT, please reach out to us to discuss whether or not they could be suitable for you.


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