Non-Traded REITs

Real estate investment trusts (REITs) are investment vehicles that invest in commercial real estate or real estate-related debt. The structure has been available since the early 1960's, and was developed as a way to allow individual investors access to large-scale, income-producing real estate. To qualify as a REIT, a company must have the bulk of its assets and income connected to real estate and distribute at least 90% of its taxable income to shareholders annually in the form of a dividend. REITs may either be public investment vehicles registered with the SEC or they can be private placement REITs. Individual REITs can either be traded on an exchange or choose to be non-listed and, therefore, non-traded. 

The primary sectors of the commercial real estate market include office buildings, retail stores, multi-family, and industrial properties such as distribution facilities. Properties such as healthcare facilities, hotels, and storage facilities are considered specialty sectors. Rental income provides investors with a current income stream and potential capital appreciation of the investment and may provide lower volatility and lower correlation to stocks. 

The amount and frequency of dividends paid by non-traded REITs are not guaranteed and some distributions paid to investors may come from the proceeds of the offerings.  Most distributions are taxed as ordinary income. Distributions involving a return of capital are taxed at capital gains rates at the time of liquidation. Please consider speaking with a tax advisor prior to investing.