What Is a Private REIT?
A private, non-traded REIT is a company that owns a diversified portfolio of income real estate. The structure dates to the REIT Act of 1960, and to keep its pass-through tax status a REIT must distribute at least 90% of its taxable income to shareholders. A non-traded REIT does not list on an exchange, so the share price does not swing with the market each day. One investment buys a slice of dozens of properties across sectors and regions.
The appeal is diversification in a single ticket. Instead of betting on one building, you own a piece of the whole book: apartments, industrial, medical office, and more. Distributions arrive monthly and carry the pass-through tax treatment REITs are built on. The cost is liquidity. You get your money back through a repurchase program, not a market order.
How It Works
- Buy shares at net asset value. Purchase directly from the REIT, priced off the portfolio's appraised value.
- Own a diversified portfolio. Your capital spreads across sectors, markets, and tenants.
- Collect monthly distributions. The REIT pays out most of its income to shareholders.
- Redeem through repurchase. Exit through the REIT's share-repurchase program, subject to periodic caps.
- Contribute property via 721, if you prefer. Owners can roll real estate into the REIT through a 721 exchange and defer the gain.
One check buys the whole portfolio. Diversification without picking a single building.
Why investors choose a private REITTax Advantages
A REIT owes no corporate tax on income it distributes, so earnings are taxed once, at the shareholder level.
Ordinary REIT dividends generally qualify for the 20% qualified business income deduction, lowering the effective rate.
Property owners can contribute real estate into the REIT through a 721 exchange and defer the capital-gains tax.
Who It's For
A good fit
- Investors who want diversified real estate in one holding.
- Those seeking monthly income without single-asset risk.
- Smaller allocations; minimums start near $2,500.
- Property owners planning a 721 contribution.
Not a fit
- Anyone who needs daily liquidity or a market exit.
- 1031 buyers looking for direct like-kind property.
- Investors who want control over specific assets.
- Those uneasy with repurchase caps and suspensions.
Considerations & Risks
Liquidity runs through a share-repurchase program the board can cap or suspend, so treat this as a multi-year holding. Share prices come from periodic appraisals, not a live market, which smooths reported value but can lag reality. Fees and the pace of capital deployment shape early returns. Distributions depend on portfolio income and are not guaranteed.
Public vs. Non-Traded REITs
| Feature | Public REIT | Non-Traded REIT |
|---|---|---|
| Liquidity | Daily on an exchange | Periodic, limited redemptions |
| Price volatility | Higher, market-driven | Lower, NAV-based |
| Minimums | One share | $1K–$25K+ |
| 721 UPREIT intake | Rare | Common |
| Valuation | Live market price | Periodic NAV |
| Best for | Liquidity & trading | Income & 721 roll-ups |
General comparison; specific REITs vary. Not investment advice.
Frequently Asked Questions
Is a private REIT a 1031 vehicle?
How do I get my money out?
How is the share price set?
What is the minimum investment?
Glossary
Related Offerings
Baker Diversified Real Estate REIT
Industrial Income REIT
