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Warning to Investors: Research Carefully Before Investing in Public Non-Traded REITs

Meyer Wilson

The Financial Industry Regulatory Authority (FINRA) recently launched an alert, warning investors to perform careful reviews before investing in public non-traded real estate investment trusts (REITs).

When interest rates are low, investors can be tempted to seek out investment products offering better yields. One of those products that is becoming increasingly popular is the publicly registered non-exchange traded REIT. A significant difference between non-traded REITs and exchange-traded REITs is, as its name implies, that non-traded REIT shares do not trade on a national securities exchange.

Why does this matter? There are a few reasons:

  • These products can be illiquid for eight years or longer

  • Investors are extremely limited when it comes to early redemption of shares

  • Selling these types of shares can warrant high fees that eat into the investor’s total return

  • The dividends investors receive are not solely from earnings, but can include borrowed money

The Truth About Non-Traded REITs

Non-traded REITs are generally riskier than exchange-traded REITs. If you are considering this product as an investment option, familiarize yourself with the benefits, risks, features, and fees.

Diversify your investments

As with many things in life, it can be risky to put all your eggs in one basket. It is no different for investments, particularly non-traded REITs.

There are no guarantees

With non-traded REITs, your initial investment is not a guarantee. This amount can increase or decrease in value.

Look at more than just distributions

It can be tempting to focus on the distributions the non-traded REIT is producing in the moment, but remember that these distributions are subject to change. Sometimes they are suspended, and in other cases, they stop altogether.

Keep an eye on redemption policies

If you do invest in a non-traded REIT, remember that it’s hard to get money out of this type of investment when you need it, so watch out for changes in redemption policies.

Protect your retirement

Your retirement money is precious. Don’t risk it by investing large portions of it into a non-traded REIT.

Be wary of public offering announcements

“It’s about to go public!” If you’ve heard that before in regard to a non-traded REIT, be cautious. Because the public offering process is so long and arduous, many times, nothing ever comes of claims like this.

For more information, we invite you to watch our video The Dangers of Non-Traded REITs. Meyer Wilson helps investors recover losses caused by fraud and misconduct. If you suffered substantial investment losses, please contact our attorneys today for a free review of your legal rights and options.