An eREIT is a non-traded real estate investment trust sold to the public online through crowdfunding platforms under the SEC’s Regulation A+ exemption. Shares don’t trade on any stock exchange, minimum investments can start as low as $10 to $500, and both accredited and non-accredited investors can buy in. In exchange for that accessibility, you accept that your money is illiquid: selling requires the trust to buy your shares back through a redemption program the board can limit or suspend at any time.
The structure combines SEC-regulated disclosure with the tax pass-through treatment of a traditional REIT, placing eREITs somewhere between a public stock and a private real estate fund.
How an eREIT Differs From a Publicly Traded REIT
Both types of REIT satisfy the same IRS qualification rules, distribute at least 90% of taxable income to shareholders, and file annual returns on Form 1120-REIT.1Internal Revenue Service. Instructions for Form 1120-REIT (2025) The differences are in how shares are priced, how you buy them, and how you get out.
A publicly traded REIT lists on an exchange, so its price moves in real time with the market and you can sell during any trading session. An eREIT’s shares aren’t listed. Price is set periodically based on the net asset value of the underlying properties rather than on what buyers and sellers will pay that day. That insulates the shares from panic-driven swings, but it also means you cannot exit on your own timeline. Selling means participating in the trust’s redemption program.
The minimum to buy in is different too. A public REIT costs whatever one share trades for. An eREIT platform sets its own minimum, typically in the low hundreds of dollars. Making real estate investing accessible at that scale is the whole point of the Regulation A+ framework these trusts use.
Who Can Invest and How Much
Anyone can invest in an eREIT, but how much depends on whether you qualify as an accredited investor. The SEC defines an accredited investor as someone with net worth above $1 million excluding a primary residence, or annual income above $200,000 (or $300,000 with a spouse) in each of the prior two years with the same expected in the current year.2U.S. Securities and Exchange Commission. Accredited Investors Certain licensed investment professionals also qualify. Accredited investors face no cap on how much they can put into a Regulation A+ offering.
Non-accredited investors are capped per offering at 10% of the greater of annual income or net worth.3eCFR. 17 CFR Part 230 – Regulation A Conditional Small Issues Exemption If you earn $100,000 a year and have $80,000 in net worth, your cap on that offering is $10,000. The cap applies separately to each offering, so investing across multiple eREITs is possible, though each platform may add its own suitability rules on top of the federal limits.
Regulation A+ Tier 2, the tier eREITs use, allows an issuer to raise up to $75 million in any 12-month period from both accredited and non-accredited investors and preempts state-by-state securities registration.3eCFR. 17 CFR Part 230 – Regulation A Conditional Small Issues Exemption4SEC.gov. Regulation A Before you can invest, you’ll complete an online questionnaire covering income, net worth, and investment experience so the platform can confirm you meet both federal and platform standards.
Buying eREIT Shares Inside a Retirement Account
eREIT shares can be held in a self-directed IRA or self-directed 401(k). The process involves opening an account with a custodian that handles alternative assets, funding it through a contribution, transfer, or rollover, and directing the custodian to purchase shares on your behalf. Because the trust is structured as a REIT, dividends paid into your IRA are generally exempt from unrelated business income tax even when the underlying properties carry debt. That exemption doesn’t extend to most other real estate fund structures, which is one reason the REIT wrapper is useful for retirement accounts.
What the Trust Actually Owns
eREITs generally follow one of two strategies, and many blend them.
An equity-focused eREIT buys physical properties: apartment buildings, warehouses, office space, and other commercial real estate. Revenue comes from rent, and shareholders benefit from both cash flow and any appreciation over time. Portfolio managers handle leasing, maintenance, and eventual resale.
A debt-focused eREIT acts as a lender rather than an owner. It originates or purchases mortgages and real estate loans, often senior secured loans or mezzanine financing to developers, and earns income through interest payments. Debt positions typically offer more predictable income and less upside than owning property outright; in a downturn, the borrower’s equity sits below you in the capital stack and absorbs losses first.
Hybrid trusts hold both. The offering circular describes the intended allocation and how much latitude management has to shift it over time.
How eREIT Distributions Are Taxed
REIT distributions aren’t taxed as a single category. Each year, the trust classifies what it paid you into several buckets, and the treatment varies:
- Ordinary dividends. The largest portion for most eREITs, taxed at your marginal rate.
- Qualified dividends. A smaller slice may qualify for the long-term capital gains rate. This happens less often with REITs than with regular corporate stocks because most REIT income comes from rents rather than already-taxed corporate earnings.
- Capital gain distributions. When the trust sells a property at a profit, the gain passed through to you is taxed as a long-term capital gain regardless of how long you’ve held your shares.5Internal Revenue Service. Topic No. 404, Dividends and Other Corporate Distributions
- Return of capital. Not taxed when received, but reduces your cost basis in the shares. Once basis reaches zero, further return-of-capital distributions are taxed as capital gains.6Internal Revenue Service. Mutual Funds (Costs, Distributions, Etc.)
The breakdown arrives each year on Form 1099-DIV, with separate boxes for ordinary dividends, qualified dividends, capital gain distributions, and nondividend distributions.7Internal Revenue Service. Instructions for Form 1099-DIV The return-of-capital portion is easy to overlook, and ignoring it leaves you with an incorrect cost basis and a larger-than-expected tax bill when you eventually sell.
Qualified REIT dividends, meaning the ordinary-income portion, are eligible for a 20% deduction under Section 199A of the Internal Revenue Code.8Office of the Law Revision Counsel. 26 USC 199A – Qualified Business Income On $5,000 in qualified REIT dividends, that’s a $1,000 deduction before you calculate tax on the income. Unlike the broader qualified business income deduction, the REIT dividend piece has no income limitation, so high earners benefit too. The deduction was originally set to expire after 2025 but was made permanent by the One Big Beautiful Bill Act, so it remains available for 2026 and beyond.
Fees and Conflicts of Interest
eREIT fees are layered, and they come directly out of your returns. The offering circular discloses them, but the language can make total drag on performance hard to see at a glance.
- Annual management fee. An ongoing charge for portfolio management, typically 1% to 1.5% of assets under management.
- Acquisition fee. A one-time charge when the trust buys a property, generally 1% to 3% of the purchase price.
- Disposition fee. A similar one-time charge when the trust sells, also typically 1% to 3% of the sale price.
- Performance or incentive fee. A share of profits above a target return, often 20% of gains above an 8% preferred return.
Conflict-of-interest risk is real. Many sponsors also own or control affiliated companies that provide property management, brokerage, and loan servicing to the trust, earning fees regardless of investor outcomes. Under NASAA guidelines, independent trustees must review affiliated-party compensation annually and certify it’s reasonable, and total fees paid to affiliates including sales commissions are capped at 6% of the sale price.9NASAA. NASAA Statement of Policy Regarding Real Estate Investment Trusts (As Amended September 7, 2025) Read the related-party transaction disclosures in the offering circular closely. Most of the tension between sponsor incentives and investor outcomes lives there.
Liquidity and the Redemption Program
Because the shares don’t trade on an exchange, selling them means asking the trust to buy them back through a share redemption program. This is the part of an eREIT that catches investors off guard.
Programs typically layer several restrictions. A minimum holding period of six months to one year applies before you can request any redemption. After that, you submit a formal request during a designated window, opened quarterly or semi-annually by most trusts. Advance notice of 60 to 90 days before the next redemption date is common. Early exits carry a cost: redeeming in the first several years usually triggers a discount to the repurchase price or a redemption fee on a sliding scale, often 1% to 3% of share value, decreasing the longer you’ve held.
The larger risk is discretionary. The board of directors has broad authority to limit, modify, or suspend the redemption program at any time. The trust is not legally obligated to buy back your shares, even during an open redemption window. The offering circular states this plainly if you read it closely.
This is not theoretical. In late 2022 and into 2023, major non-traded REITs including Blackstone’s BREIT and Starwood’s SREIT saw a surge in redemption requests and imposed withdrawal caps. Blackstone didn’t fully lift its cap until March 2024. Starwood was still working through a backlog of nearly $1 billion in pending redemptions as late as mid-2025. Sector-wide, the outstanding redemption backlog eventually fell below 2% of total requests, but the episode showed how quickly liquidity can evaporate when many investors try to exit at once.
When you evaluate an eREIT, look at the fine print: monthly and quarterly caps on total redemptions (usually expressed as a percentage of net asset value), the board’s authority to change terms, and what happens to your request if the fund runs out of cash. If you cannot afford to have the money locked up for five or more years with no guarantee of access, this isn’t the right investment.
How to Check on an eREIT Before and After You Invest
Before selling shares, an eREIT files an offering circular on Form 1-A with the SEC and goes through a qualification review. The circular lays out the business model, management, financial statements, risk factors, and fee structure. Once qualified, the trust files ongoing reports: an annual Form 1-K with audited financials, a semi-annual Form 1-SA, current-event reports on Form 1-U when something material happens, and a Form 1-Z when the issuer terminates its reporting obligations.10SEC.gov. Form 1-Z Exit Report Under Regulation A All of these are available through the SEC’s EDGAR database, and they’re your best tool for evaluating a trust before you invest and monitoring it after.