Best Non-Traded REITs for 2023 • Benzinga

Most REITs are publicly traded, and the opportunity to generate passive income secured by real estate makes them one of the most popular alternative investments in the real estate asset class. However, the fact that these REITs are publicly traded leaves them vulnerable to stock market volatility. 

However, another type of REIT may provide stability and more predictable returns than a public REIT:  a non-traded REIT. Instead of being traded on a major stock exchange, shares of non-traded REITs are purchased through a real estate crowdfunding platform.

The RealtyMogul Apartment Growth REIT is a non-traded REIT that invests capital in apartment complexes mostly located in what are considered to be resilient markets that can offer both current income potential and growth for the future. The Apartment Growth REIT has made quarterly distributions equating to 4.5% annualized based on purchase price as it seeks to realize as much capital appreciation as possible, generally reaching those goals through renovation and the repositioning of those properties. 

1st Streit Office is the current non-traded REIT offering of Streitwise, which is comprised of 2 Class A commercial properties along with properties that could be added in the future. These properties include the Allied Solutions Building, a $32 million mixed-use property in Carmel, Indiana, just outside Indianapolis and Streitwise Plaza, a 290,000 square foot office park in Sunset Hills, just outside St. Louis.

The Growth & Income REIT is a fund that hopes to make both equity and debt investments in the commercial real estate sector that will leverage the valuation and growth potential of key U.S. markets, with a focus on diversified exposure, capital appreciation, income potential and resiliency.

The RealtyMogul Income REIT is a non-traded REIT that makes equity and debt investments in diverse commercial real estate properties.

The REIT prefers to focus on providing monthly income to investors through diligent work on the back-end that can provide higher returns for all.

Historically, the REIT has paid annualized cash between 6% and 8% for well over 6 years, distributed nearly $30 million to investors and purchased over $350 million in assets. 

The SmartStop Self Storage REIT bills itself as a “technology-driven” and self-managed REIT that is fully integrated with its operations team and manages over 15 million square feet of storage space in North America. 

A real estate investment trust (REIT) is a company that owns, operates or finances income-generating real estate. The most common type of REIT is an equity REIT. An equity REIT uses a combination of its own capital and investor contributions to own and operate large commercial real estate portfolios, which are usually spread across multiple geographic markets. 

The real estate in equity REIT portfolios is carefully selected for its ability to generate net income from collected rents, which is distributed to investors (typically as a quarterly dividend). Secondly, REITs can make money when properties in the portfolio appreciate and are then sold, after which time those revenues are also distributed to investors. 

In spite of the fact that non-traded REITs are not listed on any public exchanges, they are still subject to several layers of government regulation. First of all, they are still required to create an investment prospectus and submit it to the U.S. Securities and Exchange Commission (SEC). Additionally, non-traded REITs are still responsible for complying with the same regulatory report filing requirements of publicly traded REITs. Finally, non-traded REITs are still required by the IRS to pay 90% of any taxable income generated by the REIT to shareholders. 

All these regulations are designed to protect the interest of shareholders and make sure the REIT is being operated properly. In short, an individual REIT’s “non-traded” or “private” status does not release it from an obligation to act fairly, ethically and transparently with the investor’s hard-earned money. 

As with any investment opportunity, non-traded REITs have a number of different pros and cons. On the pro side, non-traded REITs offer the following potential benefits:

• High potential payouts
• Significant tax benefits
• Equity ownership of real property
• Diversified portfolio

On the con side, non-traded REITs have potential drawbacks, including:

• Less regulatory oversight
• High minimum investment
• Lack of liquidity for shares-no secondary market
• Long hold period