NASAA’s New Non-Traded REIT Rules

NASAA’s New Non-Traded REIT Rules: What Investors Need to Know

The North American Securities Administrators Association (NASAA) recently approved updates to its guidelines for non-traded real estate investment trusts (REITs). These are the first major revisions since 2007 and are designed to strengthen investor protections. While non-traded REITs are often marketed as income-producing real estate investments, they come with significant risks that many retail investors may not fully understand.

Key Changes to NASAA’s Guidelines

Effective January 1, 2026 (subject to each state’s adoption):

• Higher investor thresholds – Investors generally must have both $100,000 in annual gross income and $100,000 in net worth, or a minimum net worth of $350,000 (up from $250,000). Thresholds will be reviewed for inflation every five years.
• 10% concentration limit (for non-accredited investors) – Unless a state regulator requires otherwise, sponsors may not accept non-accredited investors if their aggregate investments in non-traded REITs and other non-traded direct participation programs would exceed 10% of their liquid net worth at the time of investment.
• Codified “conduct standards” – The Guidelines explicitly reference standards such as Regulation Best Interest, fiduciary duties, and suitability rules. Broker-dealers and advisers cannot assume that mere compliance with the REIT Guidelines satisfies their separate best-interest/fiduciary obligations; they must document that recommendations truly fit the client’s circumstances and objectives.
• Inflation adjustments – Financial thresholds will be updated every five years.

Because NASAA rules are model guidelines, each state will decide whether to adopt them, which means the impact may vary depending on where you live.

Risks of Non-Traded REITs

While non-traded REITs may sound appealing, especially when marketed with promises of steady income and diversification, they carry significant risks:

• Lack of liquidity – Shares are not traded on public exchanges, making it extremely difficult to sell before a sponsor-provided liquidity event.
• High upfront fees – Sales commissions and offering expenses can consume a sizable portion of the investment, reducing the amount actually put to work.
• Valuation challenges – Reported values are not market-priced and may not reflect the true value of underlying real estate.
• Concentration risk – Heavy exposure to illiquid products can increase vulnerability, particularly during real estate downturns.
• Conflicts of interest – Sponsors and intermediaries may earn significant fees regardless of investor outcomes.

What This Means for Investors

The updated NASAA guidelines aim to reduce unsuitable sales by tightening eligibility, capping portfolio exposure for non-accredited investors, and reinforcing brokers’ and advisers’ conduct obligations. Still, these products remain complex and risky. If you are considering a non-traded REIT—or already own one—carefully assess whether it aligns with your goals, liquidity needs, and risk tolerance.

Frequently Asked Questions about Non-Traded REITs

Are non-traded REITs safe?
No. They are illiquid, carry high fees, and values can fluctuate with the real estate market. Investors should be prepared for multi-year holding periods and potential losses.

Can I sell a non-traded REIT?
Generally, no. These investments do not trade on an exchange. Limited redemption programs, if available, are often restricted, suspended, or priced below the original investment.

What’s the difference between a non-traded REIT and a publicly traded REIT?
Publicly traded REITs list on major exchanges with transparency, liquidity, and real-time pricing. Non-traded REITs are private, illiquid, and their valuations are not market-driven—making them much riskier.

Why are non-traded REITs risky for retirees?
Retirees often need access to funds for living expenses. Illiquidity can tie up savings for years, limiting access when cash is needed.

Can I recover losses in a non-traded REIT?
Possibly. If a broker or advisor recommended a non-traded REIT that was unsuitable for your profile, you may have claims to recover losses through FINRA arbitration.

Recovering Investment Losses

If you suffered losses in a non-traded REIT, you may be able to recover your investment through FINRA arbitration. Brokerage firms must recommend only suitable investments and disclose key risks. When those duties are breached, investors may have recovery claims.

The White Law Group has represented thousands of investors in claims against brokerage firms nationwide.

Free Consultation

If you have concerns about your non-traded REIT investment, please contact The White Law Group at (888) 637-5510 for a free consultation.