How Non-Traded REITs Work
Investors interested in diversifying their investment portfolios with an investment in commercial real estate may choose to purchase shares in a non-traded REIT. Non-traded REITs pool investors’ capital to purchase or finance commercial real estate properties and other real estate-related assets. As equity is raised, non-traded REITs endeavor to build a portfolio consistent with its investment strategy. The non-traded REIT’s management team oversees the portfolio and its day-to-day operations. Rent or mortgage payments are collected from the underlying properties or borrowers and together with proceeds from sales or other realization events can be used to pay monthly distributions1 to investors.
Diversification does not eliminate risk or assure better performance. 1) There is no guarantee of distributions. Distributions may be paid from sources other than income generated from the REIT’s investments. Investing in non-traded REITs involves various risks including but not limited to loss of principal, limited liquidity and lack of price transparency.