Beware of Non-Traded REITs

Nontraded REITs:

–          typically report their estimated share value only once every 12 to 18 months

–          pay yields of 5% or more, although much of that may come from borrowed money or out of the investors’ original capital

–          the capital gains—or losses—are delayed, you’ll still be exposed to the underlying performance of the properties

–          underperformed a comparable sample of publicly traded REITs by an annual average of 1.4 percentage points between 1990 and 2011

–          it costs 8% or more in upfront commissions to buy the typical nontraded REIT. By contrast, you can buy an index fund of public REITs at no commission and with annual fees as low as 0.1%.



Protecting Your Bucket (WSJ)



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