A client came to me recently, overwhelmed. They had inherited private REITs from their father, assets passed down with the best intentions but with little guidance on what they actually were. At the time, they qualified as an accredited investor. It wasn’t a concern. But life changes, financial situations evolve, and now they were questioning everything. How liquid was this investment? What were the tax implications? What would happen if they lost their accredited status? More than anything, they just wanted to know, was this the right investment for them, or was it something they had simply accepted without understanding what it truly meant?
This wasn’t just a question about REITs. It was a question about control. They had inherited a financial decision someone else made, and now they had to figure out whether it still made sense for them. That’s the hidden challenge with private REITs. They offer a unique opportunity for real estate exposure, but they also come with trade-offs that most investors don’t fully grasp until they need to exit. For high-earning academic couples who have the means to invest, knowing whether private REITs belong in a portfolio is about more than just access. It’s about understanding how they work, what role they play, and whether the restrictions they come with are worth it.
For dual-income academic couples with high earnings, the pull toward real estate is almost inevitable. It’s the asset class of choice for the quietly wealthy, the tangible foundation of generational wealth, the investment you can see, touch, and walk through. It’s also the one that, historically, has left its mark on those who play it wrong. Those who underestimate leverage, overextend their liquidity, or assume that passive income is actually passive.
For those who want in without the baggage of direct ownership, the phone calls, the property taxes, the vacancies, the maintenance costs, or the legal battles with nightmare tenants, there’s an alternative. Real Estate Investment Trusts. For those with the income, the accredited status, and the patience, private REITs stand apart as the more exclusive, less volatile, and potentially more tax-efficient path.
The problem is that they can also be a black hole for capital if you don’t know what you’re doing.
There’s a certain type of investor private REITs are designed for, and it’s not the one still figuring out how to balance 401(k) contributions with monthly expenses. Before even looking at these investments, certain boxes should be checked.
Retirement accounts should be maxed. If you haven’t fully funded your 403(b), 457(b), or IRA, you shouldn’t be locking money away in a private REIT. Tax-advantaged growth should always come first.
Emergency savings should be bulletproof. That means at least six months of living expenses in cash. More if your income is tied to grants, contracts, or anything that isn’t 100% stable. A private REIT will not be your emergency exit. If you need to pull money out unexpectedly, you may not be able to. At least not without taking a haircut on your investment.
Debt should be minimal and intentional. Some debt makes sense, like a low-interest mortgage, federal student loans on an income-driven plan, or a strategic business loan. If you’re carrying high-interest debt, credit cards, private student loans, margin loans, it makes zero sense to tie up money in an illiquid investment when that capital could be used to eliminate unnecessary financial drag.
Your accredited status should be secure. If you qualify as accredited by earning $300K+ as a couple or holding $1M+ in assets outside your primary residence, be aware that this status isn’t guaranteed for life. Divorce, job loss, or a major financial shift can take it away. In some cases, that could create complications for private REIT investors. You may not be able to add to your position. You may find yourself stuck in an investment you no longer want. You may be shut out of opportunities that require maintaining accredited status. It’s a factor few consider but one that matters when investing in illiquid assets.
Private REITs don’t trade on the open market. That’s part of their appeal. Less volatility, no daily price swings, a buffer against market sentiment. It’s also their greatest risk. You can’t just hit “sell” and walk away. Liquidity events happen on the fund’s terms, not yours. Some private REITs offer quarterly or annual redemption programs, often with penalties for early withdrawals. Others lock up capital for years before allowing investors to exit. If you’re committing money here, you have to be absolutely certain you won’t need it in the short term.
Public REITs, by contrast, trade like stocks, offering liquidity at a moment’s notice. The trade-off is more volatility, more exposure to market cycles, and in many cases, a heavier tax burden due to the way dividends are classified.
So why take the illiquidity risk?
When structured correctly, private REITs can provide steady, tax-efficient income. They benefit from depreciation, often allowing investors to receive income distributions that are partially or entirely shielded from taxes. A major advantage if your W-2 income is already pushing you into higher brackets. They’re often focused on asset classes with strong fundamentals—multifamily housing, logistics centers, data centers, medical office buildings. Sectors that generate steady, predictable revenue even when broader markets struggle.
That doesn’t mean they’re foolproof.
Private REITs are not a guaranteed path to wealth. The success of the investment depends entirely on the management team’s ability to execute, the underlying real estate assets, and the broader economic environment.
What happens if property values decline? If tenants default? If the fund takes on too much leverage and a downturn forces distressed sales? Unlike publicly traded REITs, which have built-in transparency due to SEC reporting requirements, private REITs are far more opaque. You’re trusting the sponsor to be honest, to disclose risks accurately, and to allocate capital responsibly. Not all of them do.
Then there’s the issue of fees. Private REITs are notorious for layered expenses—acquisition fees, management fees, disposition fees, profit-sharing agreements. Some are well-structured, offering fair terms that align the investor’s success with the sponsor’s incentives. Others are little more than fee machines designed to extract maximum dollars from investors while delivering minimal returns.
Then there’s the worst-case scenario. You lose everything. It happens. Private REITs, like all private investments, have a failure rate. If the fund collapses, if the assets are over-leveraged, if a recession wipes out occupancy rates and forces fire sales, investors can be left with nothing. That’s why financial stability before investing is non-negotiable.
For those who qualify, who have the cash flow, who understand the risks and are comfortable with the illiquidity, private REITs can serve a valuable role in a portfolio. They offer diversification outside traditional stocks and bonds, steady income if structured correctly, and a hedge against inflation.
They aren’t for the unprepared. They aren’t for the investor who thinks real estate is always a sure bet. They aren’t for the couple who may need liquidity in the next five years.
For academic power couples who thrive on intellectual rigor, the approach to real estate investing should be no different. Research, due diligence, and financial preparedness must come first. When the conditions are right, when the financial house is in order, when the accredited status is stable, when the capital is truly discretionary, that’s when the conversation about private REITs becomes worth having.
That’s exactly the kind of clarity my client needed. Once we laid it all out, once we stepped back from the stress of “what do I do with this?” and into the structure of “here’s how this actually works,” the panic faded. They weren’t trapped. They weren’t doomed. They had options, and they had a plan. That’s the real value of understanding an investment. It’s not just about maximizing returns. It’s about knowing where you stand and making sure every dollar you’ve worked for is actually working for you.