The Pros and Cons of Non-traded REITs
Why You Should or Shouldn’t Invest in a Non-Traded REIT
Non-traded Northstar Healthcare Income REITs are a type of real estate investment trust that have many benefits. They are able to provide investors with the opportunity for diversification, they can be more liquid than other types of investments, and offer tax advantages.
Some other advantages include the ability to buy a portion of the properties instead of buying individual units, and because they are not traded on exchanges there is less volatility.
One drawback though is that capital gains need to be paid when selling these trusts. Additionally, while some investors may find them attractive for their high dividends or other distributions, others might see that as a negative aspect since it means you have been taxed at higher rates before receiving income from your investment.
There are some other drawbacks to investing in Non-traded REITs as well. Although you won’t have to pay taxes on capital gains or dividends with these types of investments, you will not be eligible for any income tax deductions either. With non-traded REITs, the value of your shares can drop significantly after you purchase them. The investment is illiquid and if you need to cash out early, there may be a significant loss in net worth when selling. Also, there are no protections for the issuer, and it is possible that there may be lawsuits or bankruptcy.
However, many investors still find Non-traded REITs to be a worthwhile investment when trying to diversify their portfolios.
In conclusion, Non-traded REITs can make good investments given certain criteria such as diversification in types of real estate investing and risk tolerance among other things. They do offer tax advantages but also come with risks including having to pay capital gains taxes whenever they sell the trust which could keep potential yield lower than investors might have expected.