Nontraded REITs have been the subject of much debate in the investment community because many of the companies are fraught with fees that tend to diminish investment returns.
Other complaints include the lack of liquidity for investors who may have to wait years before they can get their money out of a nontraded REIT (real estate investment trust).
Nontraded public REITs are public companies that invest in commercial properties, but are not traded on an exchange. They are required to file their financial information with the Securities and Exchange Commission, just like any other public company, yet their shares do not trade on a stock exchange.
The industry’s bad reputation is not unwarranted, as certain companies and brokers have generated huge fees while returning relatively little to investors.
However, not all nontraded REITs are alike and not all investment advisers charge a commission. Some nontraded REITs have generated good returns for investors in a timely manner. Investors who purchased successful nontraded REITs and bypassed a brokerage commission did even better.