A non-traded REIT or a real estate investment trust (REIT) is not listed and marketed on a public exchange and accurate information about the current non-traded REIT news helps investors to invest in these firms. Financers approach varied real estate investments with lesser fund requirements and get extra tax rewards from non-traded REITs. A firm or corporation that owns, controls, and finances income-generating real estate investments.
Planned and designed like mutual funds, REITs are primarily pooled funds from numerous financiers, used to generate wealth and gain access to investment options that cannot be accessed individually.
Real estate investments cannot easily convert into cash as they are expensive, diverse, and need high maintenance. These features, on a regular basis, make investing for retail investors very difficult in real estate. However, many retail investors pool their funds together through these firms. And thus, retail financiers invest in real estate with the assistance of a professional real estate portfolio manager, without coping with the problems of purchasing, handling, and investing in the individual properties themselves.
REITs are firms or corporations that – purchase properties, collect rents from leaseholders, and again distribute these rents to stakeholders as dividends. Hence, these corporations follow simple business protocols.
In general, REITs are publicly traded on a financial exchange like shares; but, some of these firms are not listed publicly. And, as the investment trusts are not traded on a secondary market, they cannot get easily converted into cash. This makes the cost and expected returns higher from financiers as well. But for the managers of these investment trusts, are highly approved as the capital is locked up for a longer period of time.
There are some characteristics and features of Non-Traded REIT:
• Non-Traded REIT works like traded ones with the same business model, moderate tax behaviors, and a commitment and dedication to return a high proportion of income back to these real estate investment holders in the form of dividends.
• These firms, though, are not listed publicly, but they are still registered with the SEC. They also make regulatory filings which include quarterly and annual financial reports.
• Mostly, these real estate trusts are designed with a finite maturity date that is built-in, where there are 2 possible alternatives in which one is reaching maturity.
• These investment trusts are listed on a public exchange.
• These corporations or trusts should liquidate.
There are 2 types of non-traded REIT:
1. Private REITs – need institutional and authorized investors to have a certain net worth to qualify for investment opportunities.
2. Public non-listed REITs– these are open to non-accredited investors as well.
They generally specialize in a particular real estate sector. However, there are many different types of properties in which these trusts are diversified. Examples include:
- Residential like houses etc.
- Commercials.
- Industries like warehouses, and factories.
- Infrastructure (pipelines, cables, telephone towers)
- Others include – facilities, timberland, etc.
Now, discussing the advantages and benefits of Non-Traded real estate ITs, they are as follows:
•These are available to almost all investors and do not require huge funds.
• These are transparent in providing financial information and are regulated by the SEC.
• There is no fluctuation and volatility in daily prices.
• Non-traded REITs are not as rigorous and concentrated as direct investment into any property.
• Investing becomes much easier in Real Estate using REITs.
• In contrast with direct property investments, these investment trusts have a lower liquidity risk
• Since these firms are regulated by the SEBI, the chances of any unfair play are minimal.
• They are transparent, as they reveal the capital portfolio yearly and half-yearly.
• They also offer higher dividends in returns.
Since they are organized as trusts; REITs also offer tax advantages to the investors or financers, and additionally, they also receive favorable tax treatments and virtually pay out all of their income as dividends to financers. And this makes REITs very pleasing and appealing to older income investors.
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