A private REIT can be an appealing way to own a diversified slice of institutional real estate and collect regular income, without managing anything or riding the daily swings of the public market. But it's a private, illiquid security with real constraints, and investing in one well means understanding the requirements, the economics, and the terms that govern getting your money back. This memo walks through who can invest, what you'll typically commit, what to expect on yield and liquidity, and the due diligence that separates a sound private REIT from a weak one.
- Private REITs are generally limited to accredited investors and sold via Regulation D private placements.
- Minimums are typically higher than public or non-traded REITs — often tens of thousands of dollars.
- They aim to pay regular distributions, but yields vary and aren't guaranteed; watch for return of capital.
- Liquidity is limited and governed by redemption programs and lock-ups — read those terms carefully before investing.
Who can invest: the accredited standard
Because private REITs are sold under Regulation D and not registered for public sale, they're generally available only to accredited investors — broadly, those meeting SEC income thresholds (over $200,000 individually or $300,000 jointly in recent years) or a net worth above $1 million excluding a primary residence, with newer credential-based pathways as well. You'll typically verify your status as part of subscribing. Investors who aren't accredited but want REIT exposure generally look to public or non-traded REITs instead, as we cover in private vs. public vs. non-traded REITs.
Typical minimum investment
Private REIT minimums are usually higher than their public or non-traded cousins, frequently running into the tens of thousands of dollars and sometimes higher for institutional-style offerings. The higher floor reflects both the private nature of the offering and the sophistication expected of accredited participants. Because the commitment is sizable and illiquid, a private REIT should generally be one position within a diversified portfolio rather than a place to concentrate, and the amount you commit should be money you can leave invested for years.
Distributions and yield expectations
Private REITs are typically income-oriented, aiming to pay regular distributions from the rental income of their portfolio. The yield varies widely by strategy, leverage, and property type, and — as with any real estate investment — it is a target, not a guarantee and can be reduced if the portfolio underperforms. Two cautions carry over from our DST work: be skeptical of a distribution that appears to exceed the portfolio's cash flow (it may be partly return of capital rather than true income), and evaluate yield net of fees. A transparent sponsor will show you what's funding the distribution; the absence of that clarity is itself information.
Liquidity, redemptions, and lock-ups
The defining constraint of a private REIT is illiquidity. There's no public market, and you typically access your capital through a redemption program — but those programs commonly include an initial lock-up (often a year or more), periodic redemption windows, caps on how much can be redeemed in a period, and the sponsor's discretion to limit or suspend redemptions, especially in stressed markets. In other words, the ability to exit is real but conditional and not guaranteed when you most want it. Read the redemption terms as carefully as the return projections; they determine whether "semi-liquid" means anything when it counts.
The investment process
- Confirm suitability and accredited status — and that the illiquidity fits your needs.
- Review the offering — strategy, portfolio, leverage, fees, and redemption terms.
- Read the private placement memorandum (PPM) for the full risk and fee disclosure.
- Subscribe and fund the investment, usually through a broker-dealer or adviser.
- Hold and monitor — collect distributions, review statements, and track NAV updates.
Because private REITs are sold through financial professionals who conduct suitability review and often rely on third-party due diligence, an adviser is usually part of the process; understand how they're compensated, as we note in our how-to-invest-in-a-DST memo.
A due-diligence checklist
Before committing, make sure you can answer: What is the sponsor's track record, and how have prior offerings performed? What does the portfolio hold, and how diversified and leveraged is it? What is the full fee load, and what's my projected return net of it? Is the distribution supported by actual cash flow? And — critically — what exactly are the redemption terms and lock-up? How is NAV determined and how often? A sponsor who answers these clearly is demonstrating the transparency a private, illiquid vehicle demands; evasiveness on any of them is a reason to step back. As always, review the specifics with your own financial, tax, and legal advisors before investing.
Frequently Asked Questions
Do I have to be accredited to invest in a private REIT?
Generally yes. Private REITs are sold under Regulation D and limited to accredited investors, and you'll verify your status when subscribing. Non-accredited investors typically use public or non-traded REITs instead.
How much do I need to invest in a private REIT?
Minimums are typically higher than public or non-traded REITs, often in the tens of thousands of dollars and sometimes more. Treat it as one position in a diversified portfolio, not a place to concentrate.
What yield do private REITs pay?
It varies by strategy, leverage, and property type, and is a target rather than a guarantee. Evaluate yield net of fees, and be wary of distributions that exceed cash flow, which may be partly return of capital.
How do I get my money out of a private REIT?
Through a redemption program, which typically has an initial lock-up, periodic windows, caps, and the sponsor's discretion to limit or suspend redemptions. Liquidity is real but conditional, so read the terms before investing.
What should I check before investing in a private REIT?
The sponsor's track record, the portfolio's diversification and leverage, the full fee load and net return, whether distributions are supported by cash flow, and the redemption and NAV terms. Review with your advisors.
Glossary
- Private REIT
- A Regulation D REIT offered to accredited investors, the least liquid REIT type.
- Redemption Program
- A private or non-traded REIT's mechanism for buying back shares, typically with lock-ups, caps, and discretion.
- Return of Capital
- A distribution that returns part of your own investment rather than income earned.
- Net Asset Value (NAV)
- The appraisal-based per-share value used to price private and non-traded REITs.
Disclosures
This memo is published by Baker 1031 for general informational and educational purposes only. It is not investment, legal, or tax advice, and is not an offer to sell or a solicitation to buy any security. Private and non-traded REITs are illiquid and involve substantial risk including possible loss of principal; private REITs are sold only to verified accredited investors via private placement under Regulation D.
Every example here is illustrative and hypothetical, included to show how the mechanics work; it is not a projection or a representation about any specific offering, and there is no assurance any distribution or return will be achieved. Tax treatment depends on your individual facts and on rules that can change. Securities offered through Aurora Securities, Inc., member FINRA / SIPC; Baker 1031 Investments is independent of Aurora Securities, Inc. Consult your own CPA and attorney before investing.
