Process of starting a Non-Traded REIT

3 Replies

You'll need an attorney knowledgeable specifically in REIT law. Then, after charging you $5000 for the initial consultation, research and feasibility study, he will recommend an offering utilizing Reg D, 506 c instead as being less expensive, easier to sell, less regulated, and have a much better chance of success.

Originally posted by @Elijah Upchurch :

Hello,

I work for a company looking to start a non traded REIT. Anyone know the process of doing so? Do I need to get in with the RIA network? If so, How?

Define 'non-traded'. I think you mean an REIT that is not listed on a stock exchange.

If so, how many investors do you need to have as shareholders? A long time ago it was 100 or 100+. I believe you had 18 months to get there. No idea what would happen if you only reached 99 before time ran out.

As non-listed REITs are less liquid, why start one? Are you expecting to list later? Is it mostly the tax advantages that are nudging you down that path? 

@Elijah Upchurch there are two types of non traded REIT's, Private REIT's and public non listed REIT's. The first uses reg d to raise money and the latter uses either reg A+ or goes the IPO route. REIT's have very specific requirements to get favorable tax treatment like having over 100 shareholders and no 5 owners can own 50% of the ownership in the REIT. Which essentially means no one entity can own over 10% of the REIT. REIT's also have other requirements and you should talk to a attorney or cpa with knowledge of the subject. Non traded REIT's typically have a liquidity event within 3-10 years to cash out the investors in the REIT, since it is non traded. This typically means liquidating the portfolio, cashing out investors by refinancing, merging with another REIT, or listing on a stock exchange. Why do you want to form a REIT, when you can do a limited partnership. REIT's don't pass through depreciation as far as I know, where if you structured as a limited partnership you can pass through depreciation.