What Is the True Value of My Non-Traded Real Estate Investment Trust?

  • February 20, 2020
  • REIT

Non-traded real estate investment trusts (REITs) are not typically suitable for the majority of investors. When your stockbroker recommends that you invest in a non-traded REIT, unless you were warned of the high risk and actual value of the security in question, you may endure considerable losses. 

Continue reading to learn more about what non-traded REITs are, what makes them unsuitable in many cases, and how to assess the value of a non-traded REIT.

What Is a Non-Traded REIT?

Before you can begin to understand the value of a non-traded REIT, you first need to have a complete understanding of what a non-traded REIT is. A non-traded REIT is a type of real estate investment that can reduce or eliminate the taxes associated with the purchase while generating returns for the investor. 

Although this may seem like an attractive investment opportunity, the issue is that non-traded REITs are not traded on a securities exchange, which also means that they are illiquid for a significant period of time. If you were to attempt to sell these securities before they become liquid, you may be forced to take a substantial discount (up to 30 percent) of the actual value of the non-traded REIT at that time. 

Stockbrokers sell these securities because they often pay higher front-end commissions (up to 9 percent) and they are not liable for the assets once the trade has been made. Brokers will often leave out the risks associated with non-traded REITs in order to further their own financial interests. 

Due to the higher levels of risk associated with non-traded REITs, these securities are only suitable for investors who are willing to accept high-risk investment opportunities and those who are interested in long-term investment opportunities.

The Best Way to Assess the Value of a REIT

Before you make the decision to invest in a non-traded REIT, you may want to take a deeper look into how the value of this type of securities are estimated. 

The estimated per-value share of a non-traded REIT depends on the financial information provided by the sponsor, without regard to who is estimating the value share—whether the broker, their firm, or an independent investment banker. There are many factors that come in to play when estimating the value of an REIT, including:

  • Property values
  • Market fluctuations
  • Portfolio conditions

To protect yourself, you should speak with your stockbroker about the value of a non-traded REIT, with the liquidity discount included, so you have a better idea of what it’s worth before becoming liquid. 

Get Help from a Real Estate Investment Trust Lawyer

If you lost investment money after investing in a non-traded REIT and are interested in learning more about your legal options for financial recovery, get in touch with a respected real estate investment trust lawyer at Wolper Law Firm, P.A.

You can schedule a free, no-obligation consultation by giving our office a call at 800.931.8452 or submitting the online contact form at the bottom of this page. 

Attorney Matthew Wolper

Attorney Matthew WolperMatt Wolper is a trial lawyer who focuses exclusively on securities litigation and arbitration. Mr. Wolper has handled hundreds of securities matters nationwide before the Financial Industry Regulatory Authority (FINRA), American Arbitration Association (“AAA”), JAMS, and in state and federal court. Mr. Wolper has handled and tried cases involving complex financial products and strategies ranging from traditional stocks and bonds to options, margin and other securities-based lending products, closed/open-end mutual funds, structured products, hedge funds, and penny stocks. [Attorney Bio]