Private Markets Due Diligence Checklist Builder

Non-traded REIT due diligence checklist

Questions to ask and documents to review before investing in a non-traded REIT, which isn't listed on an exchange and limits how often you can redeem.

Non-traded REIT due diligence checklist

A fund with periodic redemptions · Real estate · Taxable account · Full Checklist

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Investment

Date

Your checklist

The full checklist of questions.

What you're signing up for

You can ask to redeem periodically, but only a limited amount is bought back each time, requests can be prorated, and programs can be suspended.
Real estate returns come from rental income and an eventual sale, and borrowed money often plays a large role.

The manager

Is whoever recommended this being paid for it?

Referral fees and sales commissions are common — you just want to know.

Ask

What conflicts of interest are disclosed, and how are they handled?

Fees to affiliates, related-party deals, and how opportunities are split between funds can work against you.

prospectus

Who audits the financials, and who administers the fund?

Independent, established firms make reported numbers more reliable.

Ask, or prospectus

Who runs the strategy, and for how long?

Continuity of the team matters more than the brand on the fund.

Prospectus or offering documents

How did it perform through a difficult market?

One bad stretch shows more than several good ones.

Shareholder reports

Is it managed internally or by an outside adviser?

Outside advisers are often paid on total assets, which can reward growth over shareholder returns.

prospectus

Strategy and risks

How much debt does the portfolio carry, and when does it mature?

Refinancing timing drives much of real estate risk.

Prospectus or offering documents

How are properties valued, and how often?

Appraisal-based values can lag the market in both directions.

Prospectus or offering documents

Is the debt fixed-rate or hedged — and until when?

Unhedged floating-rate debt can erode cash flow quickly when rates rise.

Ask, or prospectus

Which property types and markets is it concentrated in?

Concentration in one sector or region ties results to it.

Prospectus or offering documents

Fees and terms

Total annual expenses, including any incentive fee

The fee table shows the all-in yearly cost in one place.

Prospectus fee table

Upfront sales charges or placement fees

On some non-traded REITs and BDCs, upfront commissions and fees have run as high as about 10% — they come off the top of what you invest.

Prospectus

Is the incentive fee paid on income, gains, or both?

Fees on income are paid even in years without gains.

Prospectus

Which share class would you buy, and how do its fees differ?

Non-traded funds often offer several share classes with different upfront and ongoing charges.

Prospectus

Liquidity and getting your money back

How often are repurchases offered, and for what share of the fund?

This is the real limit on how quickly you can get money out.

Prospectus

Are distributions funded by income, or partly by capital?

Distributions above income reduce what's left invested.

Shareholder reports

Is there a fee for redeeming shares held a short time?

Some funds charge an early-repurchase fee.

Prospectus

Does the fund plan to list, sell, or wind down at some point?

Some non-traded funds plan an eventual liquidity event; its timing and terms affect when you get out.

Prospectus

When can repurchases be limited or suspended — and has that happened before?

Limits tend to bite when many investors want out at once.

Prospectus

Taxes

How will distributions be taxed?

REIT and BDC distributions are generally taxed as ordinary income.

Fund documents

Will some distributions be a return of capital?

Return of capital isn't taxed now but lowers your cost basis.

Year-end tax forms

Check it yourself

Look up the fund's SEC filings

SEC-registered non-traded REITs and BDCs file annual and quarterly reports; private evergreen funds file a Form D instead.

SEC EDGAR

Check the manager's registration and disciplinary history

Free, and takes a couple of minutes.

SEC adviser search

Check whoever is selling or recommending it

Shows licensing and any complaints or disciplinary actions.

FINRA BrokerCheck

This checklist is educational. It is not investment, legal, or tax advice, and it doesn't assess or rate any investment.

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Made with AltTrack's free due diligence checklist · alttrack.com/tools/due-diligence-checklist/non-traded-reit · Educational only — not investment, legal, or tax advice.