Private REITs and Non-Traded REITs Explained

Three structures

What is a private REIT?

A private REIT is a real estate investment trust sold through a private placement instead of a registered public offering. It is not listed on an exchange and does not file regular reports with the Securities and Exchange Commission (SEC). The SEC says its investors "are typically limited to accredited investors."

A REIT is a company that owns or lends against income-producing real estate. It comes in three regulatory types, and the type decides who can buy, what you can learn and how you get out.

For how all three compare with a private syndication on returns and taxes, see REITs vs private real estate.

SEC filings

Are non-traded REITs registered with the SEC?

Non-traded REITs are registered with the SEC and file quarterly and annual reports, but their shares are not listed on an exchange. Every filing is free on the SEC's EDGAR database. The prospectus and its supplements appear as "424B3," the quarterly report as Form 10-Q and the annual report as Form 10-K.

Private REITs file only a short Form D notice, so no public list of private REITs exists. In Relli's analysis of SEC Form D data, 191 REIT and real estate finance offerings that filed a new Form D from October 2025 to September 2026 were in the main sample, plus 553 small REIT preferred offerings set aside.

Buyer rules

What are the requirements to buy a private REIT or a non-traded REIT?

Private REIT requirements usually start with accredited investor status, because most are sold under Regulation D. The accredited investor rules set the income and net worth tests. In Relli's Form D analysis, REIT and finance offerings that set a minimum had a median of $17,500.

Non-traded REITs set suitability standards instead. Blackstone Real Estate Income Trust (BREIT), for example, requires either:

• a net worth of at least $250,000, or
• gross annual income of at least $70,000 and a net worth of at least $70,000.

That net worth leaves out your home, furnishings and cars, and some states set higher standards. BREIT's minimum is $2,500 for its T-2, S-2 and D-2 share classes and $1,000,000 for Class I, unless waived.

You buy a non-traded REIT "through a broker that participates in the non-traded REIT's offering," according to Investor.gov. A private REIT is usually bought from the sponsor, through an adviser or on an online platform.

Getting out

Are non-traded REITs liquid?

Non-traded REITs are not liquid. The SEC calls them "illiquid investments" and says a listing or liquidation "might not occur until more than 10 years after your investment." Until then, the exit is the share repurchase plan. In a NAV REIT, a common type, the plan redeems shares "based on the latest NAV per share" (net asset value), in FINRA's words.

BREIT's plan shows typical limits. Repurchases are capped at 2% of aggregate NAV a month and 5% a quarter. Shares held under a year come back at 98% of the price. The board may repurchase "only some, or even none" of the shares requested. When requests exceed the caps, each is filled pro rata, and the unfilled part must be resubmitted.

Plan terms can also change. Effective April 29, 2026, according to its SEC filings, Starwood Real Estate Income Trust (SREIT) limited repurchases to requests after a stockholder's death or qualifying disability and to accounts under $5,000, each capped at $5 million a month. It accepted about $4.2 million in July, $5.1 million in August and $3.7 million in September 2026.

Is there a secondary market for non-traded REITs?

Outside buyers sometimes offer less than NAV for non-traded REIT shares. On March 5, 2026, outside investment funds made a tender offer for SREIT shares. They offered $15.00 for Class I shares, about 24.4% below the $19.85 NAV at January 31, 2026, and $14.30 for Class S, about 28.6% below $20.02. SREIT's board recommended that stockholders reject it.

Private REIT shares, the SEC notes, are also "hard to value and trade." The guide on selling private real estate early covers transfers and pricing.

Upfront fees

What fees do non-traded REITs charge?

Non-traded REIT fees start with upfront selling costs. Investor.gov says commissions and offering fees "usually total approximately 9 to 10 percent," and the SEC's bulletin says they can reach 15%. FINRA Rule 2310 presumes the terms unfair if total broker compensation exceeds 10% of gross proceeds, and in some cases if organization and offering expenses exceed 15%.

BREIT's share classes pair upfront commissions with yearly servicing fees. Its terms in its April 2026 prospectus:

• Class S-2: selling commission of up to 3.5% of the price.
• Class T-2: up to 3.0% plus a 0.5% dealer manager fee, 3.5% at most.
• Class D-2: up to 1.5%. Class I: none.
• Servicing fee: 0.85% of NAV a year on S-2 and T-2, 0.25% on D-2.
• Management fee: 1.25% of NAV a year.

The upfront fee is charged on top of NAV. A $100,000 check for Class S-2 shares at the full 3.5% buys $96,618.36 of NAV, and $3,381.64 goes to commissions. The first year's 0.85% servicing fee on that NAV is about $821.

Setting value

How is a non-traded REIT's share value set?

A non-traded REIT's share value is set by appraisals and the manager's estimates, not by trading. BREIT updates its NAV per share as of the last day of each month. Every property is appraised annually by third-party firms, and the adviser is "ultimately responsible" for the NAV.

FINRA Rule 2310 bars its firms from selling a public non-traded REIT unless the REIT agrees to disclose a per share estimated value. Starting within 150 days after the second anniversary of breaking escrow, and then yearly, that value must be based on at least annual valuations with a third-party expert's help. That rule covers public offerings, so with a private REIT, ask how often value is set and by whom.

REIT taxes

How are private and non-traded REIT dividends taxed?

Private and non-traded REIT dividends are taxed like listed REIT dividends: mostly as ordinary income, reported on Form 1099-DIV rather than a Schedule K-1. Investor.gov notes they generally miss the lower rates on other corporate dividends.

• The 20% deduction. Qualified REIT dividends, in box 5, can qualify for the 20% Section 199A deduction. The 2025 tax law (Public Law 119-21) removed its end-of-2025 expiration, so it applies in 2026. Shares must be held more than 45 days in a 91-day window around the ex-dividend date.
• Return of capital. A box 3 distribution is not a dividend. It lowers your cost basis, and once basis reaches zero, further payments are taxed as capital gains, the IRS says.
• Inside a fund. If you own a fund that owns a private REIT, you may get a K-1 that reports REIT dividend income.

The K-1 guide explains partnership income. Retirees can see how REIT dividends fit retirement income.

IRS tests

Why do private real estate funds use a private REIT?

Private real estate funds use a private REIT, often a sub-REIT under the fund, to change how investors are taxed. To qualify, the entity must pass tests in Sections 856 and 857 of the tax code:

• 100 shareholders. At least 100 owners for at least 335 days of a 12-month tax year.
• 5/50 test. Five or fewer individuals may not own more than 50% of its stock's value at any time in the last half of the year. Neither ownership test applies in the first REIT year.
• 90% payout. Dividends must equal at least 90% of REIT taxable income.
• 75% asset test. At each quarter's end, at least 75% of assets must be real estate, cash or government securities.
• Income tests. At least 75% of gross income from real estate sources such as rents and mortgage interest, and 95% from those plus dividends and other interest.

A fund counts as one shareholder, so sponsors commonly add about 100 small preferred holders. Relli's Form D analysis found 553 small REIT preferred offerings in a year.

A 2023 article, now published by Baker Tilly, lists the payoffs. Ordinary REIT dividends "categorically qualify" for the 20% deduction, with no wage limits, which matters for debt funds that often have no wages or tangible property. REIT dividends are not taxable to tax-exempt owners, while leveraged rentals in a partnership can be. Investors also skip filing in each state where properties sit. The cost: REITs "require high levels of administration and technical precision." For lending funds, see private real estate credit.

Buyer questions

What should you ask before buying a private or non-traded REIT?

Before buying a private or non-traded REIT, ask questions the prospectus or private placement memorandum should answer in writing:

1. Is this REIT registered with the SEC, and where are its filings?
2. What will I pay upfront and every year, by share class?
3. What are the repurchase limits, and has the board ever prorated or suspended them?
4. How are requests after a death or disability handled?
5. How is NAV set, and how often are properties appraised?
6. Last year, how much of the distribution came from operations, and how much from return of capital or borrowing?
7. For a private REIT, how does it meet the 100-shareholder test, and will I get a 1099-DIV or a K-1?

The SEC warns that non-traded REITs "may use offering proceeds, which includes the money you invested, and borrowings to pay distributions." It also suggests checking the seller on FINRA's BrokerCheck.