What limitation does a shareholder face with nontraded REITs?

What limitation does a shareholder face with nontraded REITs?

• A. High minimum investments for participation
• B. Minimal to no liquidity
• C. Tax implications on dividends received
• D. No voting rights at annual meetings

Answer: (B)

A shareholder in nontraded Real Estate Investment Trusts (REITs) primarily faces minimal to no liquidity. Nontraded REITs are not listed on public stock exchanges, which means they cannot be easily bought or sold in the open market like their traded counterparts. This lack of a trading market means that shareholders may find it difficult to sell their shares when they want or need to, potentially tying up their capital for an extended period. Investors should be aware that while diversification into real estate can be beneficial, the illiquidity of nontraded REITs can present challenges, especially if urgent access to funds is needed. Understanding this limitation is crucial for investors considering nontraded investments, as it emphasizes the importance of assessing their own liquidity needs and investment horizons.

A shareholder in nontraded Real Estate Investment Trusts (REITs) primarily faces minimal to no liquidity. Nontraded REITs are not listed on public stock exchanges, which means they cannot be easily bought or sold in the open market like their traded counterparts. This lack of a trading market means that shareholders may find it difficult to sell their shares when they want or need to, potentially tying up their capital for an extended period.

Investors should be aware that while diversification into real estate can be beneficial, the illiquidity of nontraded REITs can present challenges, especially if urgent access to funds is needed. Understanding this limitation is crucial for investors considering nontraded investments, as it emphasizes the importance of assessing their own liquidity needs and investment horizons.