The recent redemption limit on some non-traded REITs has sparked talk in the town. The recent development of the notable REITs has experienced a significant fire sale. But apart from investing through non-traded REIT news, it is important to understand the non-traded REITs market to gain more return as a good investor. Here are a few things you should know before investing in a traded REIT.
What is REIT?
REIT is a real estate investment trust which is a company that owns finance and operates to generate income from real estate. They are quite similar to mutual funds as they attract numerous investors to invest in their real estate investments and earn dividends without actually buying them. A successful REIT will generate a consistent income for its investor.
What is a non-traded REIT?
Non-traded REIT is a real estate investment trust not listed in public exchange. It gives their investors proper access to diversified real estate investments. It does not require high investment but can be done with little capital requirement and has numerous taxation benefits.
The securities exchange commission regulates them. They are illiquid investments but allow the retail investor to invest in them. It isn’t easy to redeem funds from public non-trade investment trusts.
Characteristics of non-traded REITs
Non-traded REITs are operated like the trade ones. They have the same business model text treatment and the obligation to return the portion of income to the holder.
They are not listed publicly but are registered with the SEC. Here are some characteristics of traded REITs.
1. They are mostly created with a finite maturity date.
2. The non-traded REIT should be listed in the public exchange upon reaching there.
3. On reaching their maturity, they should be liquidated.
4. They should never be created on a security exchange as they can be quite illiquid for a long time.
5. Although they are not traded on an exchange, their value can massively affect the economic change in the real estate market and the change in interest rates in scenarios.
Non-traded REITs are a good investment plan if you are looking for something for the long term. They are good at providing returns, but taking care of risk factors is important as they are quite risky.
Who should invest in them?
Only some investment plans are for you. You should understand your requirements and invest according to them. Non-traded REITs provide numerous benefits, but it is important to understand your requirements and work accordingly.
● If you are an individual investor looking to acquire a portfolio in commercial real estate property independently, non-traded REITs are for you.
● If you want to see the advantage of a professional team who will work to manage your daily operation on the property.
● If you wish to invest a manageable amount of capital.
● If you are searching to diversify investment from traditional stocks and investment plans.
Benefits of non-traded REITs
If you understand what the investment plan is giving to you, you can gain a lot of benefits from them.
1. They offer stability in the portfolio.
2. They offer a diversified portfolio.
3. They are regulated by the SEC to offer transparent financial information.
4. Available without a large capital requirement.
5. Away from fluctuation and volatility.
Cons of non-traded REITs
They also have some drawbacks of their own
1. It isn’t easy to redeem funds.
2. Charge high fees.
Non-traded REITs are perfect if you want to develop your investment skill without risking enough capital. They are in an alternative investment plan which will give you a long-term benefit over time. If you understand the basics of trading in them, you can reach great success.