What is the main limitation of non-traded REITs?

• A. They are fully liquid
• B. They are registered as private companies
• C. They are illiquid and difficult to value
• D. They can only be purchased through brokers

Answer: (C)

The main limitation of non-traded Real Estate Investment Trusts (REITs) lies in their illiquidity and the challenges associated with valuing them. Unlike publicly traded REITs, which can be bought and sold easily on stock exchanges, non-traded REITs are not listed and do not have a readily available market for their shares. This lack of liquidity means that investors may find it difficult to sell their shares promptly or receive fair value for them when they want to exit their investment.

Additionally, the valuation of non-traded REITs can be complex. Since they do not have an active trading market, their prices are often determined through appraisal methods or estimates provided by the REIT itself, rather than through continuous market transactions. This can lead to uncertainty regarding the actual market value of the investment, making it harder for investors to ascertain how well their REIT is performing relative to market conditions or other investment opportunities.

Overall, these characteristics can make non-traded REITs less attractive to some investors, particularly those who prioritize liquidity and easy access to an accurate valuation of their investments.