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WHAT IS A REAL ESTATE INVESTMENT TRUST? 

A REIT, or real estate investment trust, is an entity that owns—and usually operates—income-producing real estate. Most REITs specialize in particular type of property: residential, industrial, commercial, retail, health care. Some REITs own real estate-related debt, like mortgages.

There are three types of REIT:

  • Publicly traded REITs are listed on an exchange, and are registered and file regular reports with the SEC. Shares in publicly traded REITs are easily traded, just like any stock. They are considered liquid investments. You can gauge the value of a publicly traded REIT by following its share price.
  • Non-traded REITs are not listed on an exchange, but they are registered with the SEC and file regular reports. However, as their name suggests, are not traded in the open market.
  • Private REITs are similar to non-traded REITS, but they do not have to register with the SEC or file regular reports. They are not traded on any exchange. Typically, you must be an accredited investor in invest in a private REIT.

 

Characteristics of Private REITs
Private REITs are considered private placements, sometimes called “unregistered offerings.” This refers to the fact that private placements are not registered with the SEC and are not subject to many of the rules in place to protect investors. Because they are not traded on an exchange, it may be difficult to sell your interest when the time to sell comes.

Private REITS may be offered by private and public companies and hedge funds, among others. In the case of a private REIT, the entity owns—and usually operates—the real estate. The private REIT is likely to specialize in one kind of property: retail, residential, commercial, or industrial, for example. A private REIT may also be formed to finance a particular development, such as a shopping mall or apartment complex.


Important Reminders About Private REITs
Because private REITs are offered without some of the protections—such as disclosures and regular reports—that apply to investments that are registered with the SEC, it is very important to pay attention to the details and to talk with a qualified legal or investment advisor. Here are few things to look out for:

  • Before lending money or investing in a business, do your due diligence. A successful investor is an informed investor.
  • Ask if the private REIT limits how long you have to wait before you can sell or withdraw your funds. If you are close to retirement or to age 70½, make sure that this will not interfere with taking your required minimum distributions to avoid penalties.

Click here for more information on REITs - FINRA.org


How to Invest in a Private REIT With a Self-Directed IRA:

  1. Open an account with IRA Resources
  2. Fund the account with a contribution, fund transfer, or a rollover from another account
  3. Do your due diligence on the proposed investment 
  4. Provide investment documentation to IRA Resources
  5. Direct IRA Resources to purchase the investment on behalf of your account

 

Call (888) 322-6534 to speak with one of our account specialists for assistance.