Jan 22 (Reuters) – When a financial advisor tried to sell my
sister a fee heavy non-traded REIT last year, pitching it as an
alternative to fixed income, I told her she ought to fire him.
Then, having thought it over, I told her she ought to fire
him, re-hire him and fire him again.
Non-traded REITs are a species of real estate investment
trusts, specifically ones which are not traded on an exchange
and which typically lock investors in for seven or more years.
Like traditional REITs, non-traded ones invest in real
estate, often in a market niche like college housing or medical
office buildings, and then are allowed to not pay taxes so long
as they pay out at least 90 percent of income to shareholders.
Shareholders pay taxes on the income at their normal rates.
Sounds obscure, but actually more than $20 billion of
non-traded REITs were sold in the U.S. last year, according to
data from market tracking firm Robert A. Stanger, as investors
desperate for yield met brokers happy to trouser fat fees.