Why doesn’t your real estate investment have a price?
No ticker. No daily quote. A steady distribution that shows up every month. The non-traded REIT is pitched as the calm alternative to the stock market. The calm is partly real and partly a feature of not being priced.
Consumer education, not investment advice. Paul Powell is not currently a licensed financial advisor.
A non-traded REIT owns real estate but isn’t listed on an exchange, so there’s no market price and no easy way out. The SEC says the upfront fees on these products can run up to 15 percent of what you pay, that the distributions can be paid out of investors’ own money and borrowings, and that getting your money back early is “typically subject to significant limitations.” The number on your statement is an estimate, not a price you can sell at.
Three numbers the pitch leaves out
A REIT, a real estate investment trust, is a company that owns income-producing property: apartments, warehouses, offices, medical buildings. Many REITs trade on an exchange like any stock. A non-traded REIT is registered with the SEC and files reports, but you can’t buy or sell it on an exchange. You buy it through the person who sells it to you, and you get out when the REIT lets you.
That last part matters more than it sounds. Here are the three numbers worth knowing before you sign anything.
One: what comes off the top. The SEC’s investor bulletin on non-traded REITs says they “typically charge high upfront fees to compensate a firm or individual selling the investment,” and that “these fees can represent up to 15 percent of the offering price.” That’s money that never gets invested in a building. Newer “NAV REITs,” which price themselves monthly, cut the upfront charge, but they didn’t make it disappear. One large NAV REIT’s April 2025 prospectus lists upfront selling commissions of up to 3.5% on one share class, plus a “stockholder servicing fee” of 0.85% a year, plus a 1.25% annual management fee to the outside manager, plus a performance fee of 12.5% of total return above a 5% hurdle.
Here’s an illustration, not a quote. Put $100,000 into a share class like that. Up to $3,500 can come off the top before anything is bought. Then roughly $820 a year in servicing fees and roughly $1,200 a year in management fees, before any performance fee and before the costs of owning the buildings.
Two: where the distribution comes from. The steady payout is the whole pitch. But the SEC bulletin warns that non-traded REITs “may use offering proceeds, which includes the money you invested, and borrowings to pay distributions.” The 2025 prospectus says the same thing in its own risk summary: the REIT may fund distributions “from sources other than cash flows from operations, and we have no limits on the amounts we may pay from such sources.” A distribution funded with your own money isn’t income. It’s your principal, handed back to you and called a yield.
Three: how fast you can get out. The SEC says liquidity events, a listing or a sale of the REIT’s properties, “might not occur until more than 10 years after your investment.” Early redemption programs exist, but they “may be discontinued at the discretion of the REIT without notice” and may pay you at a discount. NAV REITs are more liquid on paper. The same 2025 prospectus caps total repurchases at 2% of the REIT’s value per month and 5% per quarter. When more people ask than the cap allows, everyone gets a pro rata slice and has to ask again next month. And the board “may modify or suspend” the plan.
Now look at your statement. Before 2016, FINRA noted, the “offering price, typically $10 per share, often remains constant on customer account statements” even after fees had reduced investors’ principal. FINRA changed the rule, effective April 2016. Statements now have to show an estimated value, either the offering price minus the selling costs, or an appraisal. That’s better. It’s still an estimate, set by appraisal, not by anyone willing to buy your shares today.
Completely. It’s all in the prospectus.
Non-traded REITs are registered securities. Every fee, every redemption limit, and every warning about where distributions come from is disclosed in a prospectus that the person selling it to you should hand you. Some investors hold them for good reasons: real estate exposure that doesn’t swing with the stock market day to day, and income they can wait on. This isn’t a page about fraud. It’s a page about what you pay for the smoothness, and who it’s paid to.
The steadiness you’re being sold is partly the absence of a price. A listed REIT that owns the same kinds of buildings moves every day because people are trading it every day. A non-traded REIT looks calm because nobody is. The value on your statement changes when an appraiser says so. That isn’t the same as the investment being less risky. It means you find out later.
Ask for the prospectus, then ask three questions in writing
If someone recommends a non-traded REIT, ask for the prospectus and any supplements. The SEC says you can also find them on its EDGAR database, usually filed as a “424B3,” along with the REIT’s quarterly and annual reports. Look for three things: the fee table, the share repurchase plan, and the section on the sources of distributions.
If you already own one, find it on your statement. The annotated statement teardown shows where the estimated value usually sits. Ask what you’d actually receive if you asked to redeem this month, and whether the fund met every request last quarter.
And check the person recommending it. A product this expensive to get into and this hard to get out of deserves a look at the seller’s public record and answers to the twelve written due-diligence questions. The full sequence is in the Method.
“For this REIT and share class, please list every fee I will pay, upfront and annually, and how much of it is paid to you or your firm. Over the last twelve months, what percentage of distributions was covered by cash flow from operations, rather than offering proceeds or borrowing? And if I asked to sell my entire position next month, how much could I get out, at what price, and could that request be limited or refused?”
If the answer to “how do I get out?” is “when the fund decides,” how much of your money belongs there?
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