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Like exchange-traded REITs, non-traded REITs invest in real estate.

They are also subject to the same IRS requirements that an exchange-traded REIT must meet, including distributing at least 90 percent of taxable income to shareholders.

The REIT must also distribute at least 90 percent of its taxable income to shareholders annually.

These distributions are taxable to the extent of any ordinary income and capital gains included in the distribution.

Broker-dealers involved in the sale of non-traded REITS are required to provide investors with a per share estimated value for the REIT using one of two methodologies described in FINRA Notice 15-02: Firms that sell non-traded REITs are required to disclose some key aspects of the investment, including: that the securities are not listed on a securities exchange; that the securities are generally illiquid; and that, even if a customer is able to sell the securities, the price received may be less than the per share estimated value provided in the account statement.

Private REITs There is another type of REIT—a private REIT, or private-placement REIT—that also does not trade on an exchange. Not only are they unlisted, making them hard to value and trade, but they also generally are exempt from Securities Act registration.

Make sure you understand that you will be locking up your investment, with only limited avenues for redemption.

If the REIT offers a share redemption program, make sure you understand how the repurchase price for your shares will be determined and, most importantly, the limitations of the plan.

You can obtain a prospectus by going to the SEC’s EDGAR database of company filings and typing in the name of the REIT, then search for entries titled “Prospectus.” Remember that the fact that a company has registered its securities or has filed reports with the SEC does not mean that it will be a good investment—or that it will be right for you. Also ask how the distribution is being funded and whether a portion of that distribution is comprised of a return of investor capital.

For this reason, non-traded REITs are generally illiquid, often for periods of eight years or more.

Early redemption of shares is often very limited, and fees associated with the sale of these products can be high and erode total return.

Review with your financial professional the risks associated with real estate investment and evaluate other products that could meet your investment objectives (investment income, for instance).

Understand the various liquidity events specific to the REIT you are considering.