Pricing is the first difference. A listed REIT's price is set continuously by the market; a non-traded REIT reports an estimated net asset value, typically updated monthly or less often, based on appraisals of its properties. That smooths the reported price and hides the day-to-day volatility a listed REIT shows, which can make a non-traded REIT feel more stable than the underlying real estate actually is.
Liquidity is the second, and it is the one that surprises investors. There is no exchange to sell into, so an investor who wants out before the REIT lists its shares or liquidates its portfolio must use the company's own share-repurchase program. Those programs cap redemptions, commonly at a small percentage of shares each quarter, and the sponsor can reduce or suspend them, which tends to happen precisely when many investors want to sell at once. An investor should assume the money may be committed for years.
Cost and the source of distributions are where the Securities and Exchange Commission's own investor guidance is most pointed, and the fact belongs on the page because it is central to evaluating one of these products. The SEC has flagged that non-traded REITs can carry high upfront fees that consume a substantial share of the money invested, so that less than a dollar of every dollar goes to work buying property. It has also warned that distributions are not guaranteed and can be funded from offering proceeds or borrowings rather than from property income, which means a headline yield can be paid partly with investors' own capital. None of this makes non-traded REITs fraudulent; it makes the reported yield an unreliable guide to what the investment is earning, and it makes the terms of exit the thing to understand before buying. Newer "perpetual-life" non-traded REITs price more frequently and often carry lower upfront loads than the older generation, but they still limit redemptions and charge ongoing fees, so the core trade-offs persist.
