Public vs. Non-Traded REITs: A Liquidity Trade-Off

A public REIT and a non-traded REIT can own the same kind of buildings, run the same kind of leases, and pay out the same slice of their income, and still feel like completely different investments. The reason is liquidity. A public REIT trades on an exchange all day, so you can sell at 10 a.m. and have cash settle in two business days, but the price moves with the stock market whether or not a single tenant has changed. A non-traded REIT is priced periodically at net asset value, so the number on your statement barely moves, but selling means asking the sponsor to buy you back through a redemption program that can be limited, queued, or shut off. That is the whole trade: market liquidity and price volatility on one side, price stability and gated redemptions on the other. This guide stays narrowly on that two-way liquidity-and-pricing question; if you also want to weigh the third category — private REITs — see our full private vs. public vs. non-traded REIT comparison. Here we walk the public-versus-non-traded difference in detail, who each one suits, and where REITs sit relative to a 1031 exchange.

What both REITs share

Before the differences, the common ground, because it is real. A REIT is a company that owns income-producing real estate and, in exchange for special tax treatment, must distribute at least 90% of its taxable income to shareholders each year and so pays no corporate tax on the income it passes through. That rule applies to a public REIT and a non-traded REIT alike. Both pool investor money, buy and manage a portfolio of properties, collect rent, and pass most of the resulting income out as distributions. Both give you fractional ownership of a diversified real-estate portfolio without your name on a deed or a tenant calling at midnight.

Both also report their dividends to you on a Form 1099-DIV rather than a partnership K-1, which makes tax filing simpler than it is for many private real-estate structures. And under the 2025 tax law, the 20% qualified-business-income deduction on ordinary REIT dividends, the Section 199A deduction, was made permanent, so a large share of the ordinary income from either structure can be taxed at a lower effective rate. Where they part ways is not what they own or how they are taxed. It is how the shares are priced and how, and how fast, you can turn them back into cash. Our guide to REITs lays out the full family if you want the wider context first.

How a public REIT works

A publicly traded REIT lists its shares on a stock exchange, and from that single fact almost everything else follows. You buy and sell through a brokerage account the same way you trade any stock, in any quantity, during market hours. There is no minimum beyond the price of one share, no accreditation requirement, and no subscription paperwork. The price is set continuously by buyers and sellers, so you always know what your position is worth to the penny, and you can exit at that price on any trading day with cash settling shortly after.

That liquidity is the headline benefit, and it carries a cost: the price moves all the time, and not only when the underlying buildings change in value. A public REIT trades with the stock market's mood, with its sector's sentiment, and especially with interest rates. When rates rise, REIT share prices often fall even if rents and occupancy are steady, because investors reprice the yield against safer alternatives. So a public REIT can drop 20% in a quarter while the actual portfolio of apartments or warehouses is performing exactly as planned. You get daily access in return for daily volatility, and the two are inseparable. The market gives you an exit every day, but it also marks your investment to the mood of the day.

Public REITs are also the most transparent of the three kinds. They file audited financials and quarterly reports with the SEC, analysts cover them, and their valuations are visible in real time. For an investor who values knowing exactly what something is worth and being able to act on it, that openness is a genuine advantage. The flip side is that the openness includes every bad day the market has.

How a non-traded REIT works

A non-traded REIT, sometimes called a NAV REIT, is registered with the SEC but does not list on an exchange. You cannot pull up a ticker and sell. Instead, the sponsor calculates a net asset value, the per-share worth of the underlying real estate net of debt, on a regular schedule, often monthly, and you buy and sell at that NAV. Shares are sold through financial advisors and broker-dealers rather than on the open market, usually with a stated minimum investment, commonly in the low thousands of dollars, though it varies by program.

Because the price is an appraisal-based NAV rather than a live market quote, it moves slowly and in small steps. Your statement does not lurch on a bad market day, and for many investors that steadiness is the entire appeal. But that smooth line hides a hard constraint on the exit. To get your money back, you do not sell to another investor; you ask the REIT to redeem your shares through its share-repurchase program. Those programs are deliberately limited, typically capping redemptions at something like 2% of net asset value per month or 5% per quarter, with the exact terms spelled out in the offering documents. When more investors want out than the cap allows, redemptions are prorated, and in stressed markets a sponsor can slow or suspend the program entirely. A stable price is not a promise of access.

This is the part that catches people. The reported value barely moves, so a non-traded REIT feels safer than a public one. But you only realize that value if the redemption window is open when you need it, and the times you are most likely to want out, a downturn, a wave of withdrawals, are exactly the times a gate is most likely to be down. The price is steady; the liquidity is conditional. Read our deeper look at whether private and non-traded REITs are safe for how those gates have actually behaved.

The liquidity trade-off, in detail

Set the two side by side and the trade-off is clean. With a public REIT you accept that the price can swing, sometimes sharply and for reasons unrelated to the buildings, in return for the certainty that you can sell any share on any trading day at a known price. With a non-traded REIT you accept that selling is slow, capped, and revocable in return for a price that does not jump around. There is no free version. You are choosing which risk you would rather carry: the risk of an ugly mark on a day you happen to need cash, or the risk of a closed gate on a day you happen to need cash.

Feature	Public REIT	Non-Traded REIT
Where it trades	Stock exchange, continuous	Not listed; sold via advisors
How it is priced	Live market price, all day	Periodic net asset value (NAV)
Liquidity	Daily; sell any share, any day	Limited redemption program, can be gated
Price volatility	High; moves with the market	Low reported volatility; steadier NAV
Minimum	Price of one share	Stated minimum, often a few thousand
Who can invest	Anyone with a brokerage account	Investor suitability standards apply
Transparency	Real-time price, full SEC reporting	SEC-registered, but no live quote
Typical fees	Low expense ratio; brokerage costs	Higher; selling commissions and management fees

One practical consequence of the fee column: a non-traded REIT usually carries higher costs, both upfront selling commissions and ongoing management fees, than a comparable public REIT, where you can often buy a diversified index for a fraction of a percent. Those costs are the price of the access model and the advice channel, and they are a real drag that a steady NAV can mask. Weigh the all-in fee load against the value you place on a stable price.

Why "stable" and "safe" are not the same word

The single most common misunderstanding is to read a non-traded REIT's smooth price line as low risk. It is low reported volatility, which is a different thing. The underlying real estate is exposed to the same forces as any commercial property, vacancy, rising interest expense, falling market rents, a soft sale environment, and those forces are just as real whether or not they show up as a daily price swing. A public REIT prices that stress into the share price immediately and visibly. A non-traded REIT absorbs it into a slower NAV adjustment, so the bad news arrives quietly and on a delay. The risk did not disappear; it was repriced on a different clock.

There is also a behavioral edge to this. Daily pricing tempts some investors to trade on noise and sell a sound portfolio in a panic. A non-traded REIT's steadiness can encourage the patience that real estate rewards, since you are not staring at a red number every afternoon. That can be a genuine benefit for the right temperament. But it only works if the discipline is a choice, not a trap, and the gated redemption is what can turn the steadiness into a trap when you actually need out. Treat the stable price as a feature for a long holding period, not as a safety guarantee.

How each is taxed

The tax treatment is largely the same across both, which is one of the cleaner parts of the comparison. Distributions from either a public or a non-traded REIT are reported on a Form 1099-DIV, and a single distribution can carry more than one tax character. The ordinary-income portion is taxed at your ordinary rates, but it generally qualifies for the permanent 20% Section 199A deduction, which lowers the effective rate on that slice. A portion may be a capital-gain distribution, and a portion may be return of capital, which is not taxed in the year received but instead reduces your cost basis and defers the tax until you sell.

Ordinary REIT dividends do not get the lower qualified-dividend rate that applies to most common-stock dividends, so do not expect that treatment; the 20% deduction is the offsetting benefit instead. Because the mechanics are identical for the two structures, taxes are rarely the deciding factor between a public and a non-traded REIT. The decision is driven by liquidity, volatility tolerance, fees, and access, not by the 1099. For the full breakdown of how a REIT distribution splits into its components, see our piece on how REIT dividends are taxed.

REITs and the 1031 exchange

Here is the point that surprises 1031 investors: you cannot exchange directly into a REIT of either kind. A 1031 exchange requires like-kind real property, and REIT shares are securities, not real estate, so rolling 1031 proceeds straight into REIT stock would be a taxable sale, not an exchange. That rules out the obvious move of selling a rental and buying a basket of public REITs with the gain deferred. If your aim is to defer a real-estate gain into a passive structure, the direct route is a Delaware Statutory Trust, which is structured to qualify as 1031 replacement property. Our DST vs. REIT comparison draws that line in full.

Where REITs do enter a 1031 plan is through the side door of the 721 exchange, also called an UPREIT. After holding a DST for a period, a sponsor may offer to acquire the DST's property into a REIT's operating partnership in exchange for OP units, a contribution that is tax-deferred under Section 721. That roll-up almost always lands in a non-traded REIT, because the program is built to absorb contributed property and issue units, not in a publicly traded one. So for the 1031 and DST investor, the non-traded REIT is usually the relevant kind: it is the likely endpoint of a 721 roll-up, the place a DST chain can eventually consolidate for broader diversification and a path to eventual liquidity. The public REIT, for all its daily liquidity, rarely plays that role.

Who each one fits

Match the structure to what you actually want from the money. A public REIT fits an investor who values daily access, a transparent price, low fees, and the ability to size a position up or down at will, and who can tolerate the share price moving with the market even when the buildings are fine. It is a good fit inside a broader stock-and-bond portfolio, for someone who treats real estate as one liquid sleeve among many and is comfortable with volatility as the price of that liquidity.

A non-traded REIT fits an investor who wants real-estate income, does not need to touch the principal for years, and prefers a steady reported value to a daily quote, accepting limited redemptions as the cost of that steadiness. It also fits the 1031 and DST investor for whom a non-traded REIT is the natural home of a 721 roll-up. The common thread for the non-traded side is patience: the structure rewards a long holding period and punishes a sudden need for cash. If there is any real chance you will need the money on short notice, the daily liquidity of a public REIT, or simply keeping that portion in cash, is the safer call. Neither structure is a substitute for an emergency fund.

One honest framing helps the most. You are not choosing between a riskier and a safer REIT. You are choosing which kind of inconvenience you would rather face: a visible price drop you can act on, or a steady price you may not be able to act on. Decide which of those you can live with, read the offering documents for the redemption terms and the fee load, and let the liquidity trade-off, not the calm-looking statement, drive the decision.

Sources & References