Private real estate investment trusts pool money from a small group of qualified investors to buy and operate properties, without listing on a stock exchange or registering shares with the SEC. That one structural choice drives everything else about them: who gets to invest, how much you have to commit, what information you receive, and when (or whether) you can get your money back. In exchange for giving up the liquidity and transparency of a publicly traded REIT, you get access to institutional-quality real estate and income that flows through to you without being taxed first at the corporate level.
Before writing a check, you need to understand four things: whether you qualify, what you’re committing, what it costs, and how you exit.
What Makes a REIT Private
Every securities offering in the United States must either be registered with the SEC or qualify for an exemption. Private REITs take the exemption route, relying on Regulation D of the Securities Act of 1933.1U.S. Securities and Exchange Commission. Exempt Offerings Most use Rule 506(b), which prohibits general advertising and limits sales to no more than 35 non-accredited investors in any 90-day period.2U.S. Securities and Exchange Commission. Private Placements – Rule 506(b) In practice, the vast majority of participants are accredited.
After the first sale, the issuer files a brief notice called Form D, which simply tells regulators the offering exists. Beyond that, private REITs are not subject to the ongoing disclosure requirements that apply to exchange-listed companies.3Nareit. Guide to Private REIT Investing You won’t find their financials in the SEC’s public database. Everything you learn comes from documents the sponsor hands you directly, which means the depth and quality of what you receive depends on who’s offering the deal.
Because shares don’t trade on an exchange, there is no daily market price. Valuations come from periodic property appraisals, sometimes only once or twice a year. A board of directors or trustees oversees strategy, but without a live market price to discipline it, your ability to independently verify what your shares are worth is limited.
Who Qualifies to Invest
Federal law restricts most private REIT offerings to accredited investors under SEC Rule 501. You qualify if any of the following applies:
- Net worth over $1 million, excluding your primary residence.
- Individual income over $200,000 in each of the prior two years, with the same expected this year.
- Joint income over $300,000 with a spouse or spousal equivalent over the same two-year period.
- Holding certain securities licenses, including the Series 65, regardless of income or net worth.4eCFR. 17 CFR 230.501 – Definitions and Terms Used in Regulation D
These thresholds haven’t been adjusted for inflation since 1982, so in real terms the bar is lower than regulators originally set it. Entities such as trusts or corporations with more than $5 million in assets also qualify.
Rule 506(b) allows up to 35 non-accredited investors in a given offering, but each must demonstrate enough financial sophistication to evaluate the risks, either on their own or with an adviser.2U.S. Securities and Exchange Commission. Private Placements – Rule 506(b) When non-accredited investors are included, the trust must provide more detailed disclosures. Most sponsors skip that complication and accept only accredited investors.
Minimum Investments and Capital Calls
Entry costs vary widely. Some private REITs marketed through online platforms accept investments as low as $1,000 to $25,000. Those designed for institutional or high-net-worth accredited investors often set minimums between $50,000 and $250,000, sometimes higher.3Nareit. Guide to Private REIT Investing Higher-minimum funds tend to be more selective about their investor base and may offer better fee structures in return for larger commitments.
Many private REITs use capital calls rather than taking your full commitment upfront. The trust draws down your committed capital in stages as it finds properties to buy. When a call arrives, you typically have 10 to 15 business days to wire the requested amount. Missing a call can trigger penalties spelled out in the subscription agreement, including partial forfeiture of your existing interest. You need to keep enough cash accessible to cover these calls on short notice, which ties up more of your liquidity than the amount already invested.
Fees to Watch For
Private REITs charge fees that can meaningfully erode returns, and because there’s no public disclosure requirement, you have to read the offering memorandum carefully to find them all. The common ones:
- Acquisition fees charged when the trust buys a property, typically 1 to 2 percent of the deal size, often on a sliding scale for larger deals.
- Asset management fees, an ongoing annual charge usually running 1 to 2 percent of invested equity.
- Disposition fees when properties are sold.
- Financing fees when the trust arranges debt.
- Performance-based incentive fees above a specified return hurdle.
Because these costs stack, the total drag can be substantially higher than you’d pay in a publicly traded REIT or index fund. Ask the sponsor for a complete fee schedule before committing. Reluctance to provide one tells you something.
Getting Your Money Back
Illiquidity is the defining feature of private REITs and the source of most investor frustration. Capital is typically locked up for five to ten years while the trust acquires, develops, or repositions properties. During that period, you generally cannot sell your shares.
Some trusts run share redemption programs, often structured as quarterly tender offers. The industry standard caps redemptions at roughly 5 percent of net asset value per quarter and 20 percent annually. The board sets those limits and can reduce or suspend the program if cash flow runs short or market conditions deteriorate. During 2022 and 2023, several high-profile non-traded REITs hit their caps and left investors waiting in line. Redemption programs are a convenience, not a guarantee.
A secondary market for non-listed REIT shares does exist through specialized brokers if you need out before the lock-up ends. Buyers typically demand steep discounts to stated net asset value, so you may recover significantly less than the trust says your shares are worth. The discount tends to widen during stressed periods when redemption gates are up and other investors are trying to exit at the same time.
How Distributions and Taxes Work
The tax benefit at the heart of the REIT structure is the ability to avoid corporate-level tax, and it comes with one hard condition: the trust must distribute at least 90 percent of its taxable income to shareholders each year as dividends. When it does, those dividends are deducted from the REIT’s taxable income, passing the tax obligation through to shareholders.5Office of the Law Revision Counsel. 26 USC 857 – Taxation of Real Estate Investment Trusts and Their Beneficiaries
You report distributions on your personal return, generally at ordinary income rates. Portions classified as capital gain distributions receive long-term capital gains treatment regardless of how long you’ve held the shares.6Internal Revenue Service. Topic No. 404, Dividends and Other Corporate Distributions Ordinary REIT dividends also qualify for the Section 199A deduction, which lets you exclude 20 percent of qualified REIT dividends from taxable income. That deduction had been scheduled to expire after 2025 but was made permanent by the One Big Beautiful Bill Act signed in July 2025.7U.S. House Committee on Ways and Means. The One Big Beautiful Bill – Section by Section
Private REITs report distributions to you on Form 1099-DIV, not Schedule K-1. Box 5 shows your Section 199A-eligible dividends; other boxes break out capital gain distributions and any return-of-capital amounts. One timing quirk: if the REIT declares a dividend in October, November, or December payable to shareholders of record in that month but doesn’t actually send cash until January, the dividend still counts as income for the earlier year.8Internal Revenue Service. Instructions for Form 1099-DIV
Risks You Should Weigh
The reduced oversight that makes private REITs flexible also makes them riskier than their public counterparts. A few points deserve special attention.
- Limited transparency. Without SEC reporting obligations, you rely on the sponsor’s voluntary disclosures. Financial statements may not be audited, valuations may be infrequent, and your ability to independently verify performance is thin.
- Valuation uncertainty. Share prices are based on appraisals and internal estimates that can lag actual market conditions. The value can appear steady even when underlying properties have declined.
- Concentration. Private REITs often hold fewer properties than large public REITs, so a single bad investment can swing the whole fund.
- Sponsor conflicts. Fees earned on acquisitions and dispositions can create incentives to transact regardless of whether a deal benefits investors. Fee structures that reward activity rather than performance are a red flag.
- Redemption gates. The board can suspend redemptions. If the trust struggles, you may be stuck in a declining fund with no exit for years.
None of this means private REITs are inherently bad investments. Some deliver strong risk-adjusted returns with real diversification benefits. But the combination of illiquidity, limited disclosure, and layered fees means your margin for error when choosing a sponsor is much thinner than with a publicly traded REIT you can sell tomorrow.
How the Subscription Process Works
Investing in a private REIT starts with paperwork, not a brokerage app. You review and sign a subscription agreement specifying how many shares you’re buying and at what price, along with an investor questionnaire verifying your accredited status and financial background. Alongside those documents, you receive the offering memorandum, sometimes called a private placement memorandum, which sets out strategy, fees, risk factors, and terms.9U.S. Securities and Exchange Commission. Bright Mountain Media, Inc. – Subscription Agreement and Purchaser Questionnaire
Read the risk factors section of the offering memorandum carefully. It’s the closest thing you’ll get to the disclosures a public REIT makes in its SEC filings. Once the trust accepts your subscription and verifies your funds by wire, you receive a confirmation notice and initial account statements. Ownership is recorded in book-entry form rather than through physical certificates.10U.S. Securities and Exchange Commission. Book Entry
Do your due diligence on the management team’s track record, the complete fee schedule, and the specific property types in the portfolio before committing capital you can’t afford to have locked away.