Non-traded REITs hold fee and fraud risks for unwary investors


By Bradd Milove

Back in the 1980s, real estate limited partnerships thrived due to tax shelter availability – setting the stage for unscrupulous promoters to take advantage of investors through control of their investment capital and properties cash flow. Fast forward to our current decade, and we find ourselves in similar circumstances; only this time, dishonest promoters are using

non-traded real estate investment trusts

, or REITs, as a vehicle for misleading pitches, hidden fees, and huge commissions at the cost of investor security. According to a

New York Times

report published earlier this year, non-traded REITs are incurring increasing scrutiny from regulatory bodies like FINRA as more and more investors find themselves the victims of fraudulent promoters – prompting honest brokers to steer clear of the complex investments in order to save clients from dramatic losses.

In most cases, and especially in today’s troubled economic climate, REITs appeal to investors seeking a secure source of income– many of whom are retired or elderly and simply looking for financial stability. And when it comes to conventional, publicly traded REITs, high liquidity and diversity often make for just such a kind of low-risk investment opportunity. However, with non-traded REITs, a complex system controlled heavily by promoters makes it much more difficult for investors to keep track of their money; and as a result, dishonest promoters have had a veritable field day charging exorbitant fees and commissions – and then turning around and giving investors their own money back in the guise of property-derived distributions. Such activity has prompted FINRA to issue warnings regarding non-traded REITs: as noted in a recent issue of

Registered Rep Magazine

, the organization’s vice president of investor education cautioned investors to beware of sales pitches that might “play up non-traded REITs’ high yields and stability while glossing over the lack of liquidity, fees and other risks.”

Under such circumstances, it behooves inexperienced and savvy investors alike to proceed cautiously with real estate investments – and to avoid falling for too-good-to-be-true pitches for non-traded REITs in order to prevent heavy losses due to investment fraud.

Protect yourself with legal resources and expert counsel from local investment attorneys

At the Law Offices of Miller and Milove, we specialize in investment and securities fraud law; and as seasoned

San Diego investment attorneys

, we’re intimately familiar with the dangers of risky investments with misleading or downright fraudulent promoters. Protect yourself from fraud by passing on non-traded REITs – and if you or someone you know ahs already been victimized by an unscrupulous investment promoter, contact an investment law professional for important resources and recovery information. To learn more about real estate investment fraud or to schedule a legal consultation, visit us online: