Private Market Real Estate Investments

By Kenneth Millar, Founder and Principal Managing Partner, SREI Group · Last reviewed: October 2026

Private market real estate is ownership of income-producing property through investments that are not traded on a stock exchange, such as Delaware Statutory Trusts (DSTs), Qualified Opportunity Funds (QOFs), real estate syndications, private funds and non-traded REITs. Most offerings are limited to accredited investors, are held for years rather than days, and are often used to defer capital gains tax after selling real estate, a business or another appreciated asset.

What Is Private Market Real Estate?

Private market real estate means owning an interest in commercial property, such as apartment communities, industrial buildings, medical offices or net-leased retail, through a vehicle that is not listed on a public exchange. Instead of buying shares on the New York Stock Exchange or Nasdaq, investors buy into a specific offering, usually alongside a professional sponsor that finds, finances and manages the property.

Because most of these offerings are sold privately under SEC rules, they are generally available only to accredited investors, and each sets its own minimum investment. Investors give up day-to-day liquidity in exchange for direct exposure to the property’s income and, depending on the structure, specific federal tax benefits.

How Is Private Real Estate Different From Publicly Traded REITs?

The biggest differences are how an investment is priced, how easily it can be sold, and who can buy it. A publicly traded REIT can be bought or sold on any trading day at the market price. A private real estate investment is typically held for years and valued periodically by appraisal, so its reported value does not move with daily stock-market trading. That is a difference in how it is priced, not a sign of lower risk.

Access and structure differ too. Publicly traded REITs are open to any investor, while most private offerings require accredited-investor status. Some private structures offer tax features that listed REIT shares cannot, such as qualifying as replacement property in a 1031 exchange, but they typically come with less liquidity, more layers of fees, and less frequent reporting.

What Are the Common Ways to Invest in Private Market Real Estate?

Each structure determines what you own, how long your money is committed, and how the investment is taxed. The table below compares the most common options.

Structure	What you own	1031-eligible?	Typical hold	Liquidity	Tax reporting
Real estate syndication	An interest in an LLC or partnership that owns a specific property	Generally no	Often 3–7 years	Very limited until the property is sold	Schedule K-1
Private real estate fund	An interest in a fund that assembles a portfolio over time	No	Often 7–10 years or longer	Very limited until the fund winds down	Schedule K-1
Delaware Statutory Trust (DST)	A beneficial interest in a trust that owns one or more properties	Yes, as replacement property	Often 5–10 years	Very limited until the property is sold	Grantor trust statement of income and expenses
DST with 721 exit	A DST interest that may later convert into REIT operating partnership units	Yes into the DST; no further 1031 after conversion	Open-ended after conversion	After conversion, units can generally be redeemed under the REIT’s terms (taxable)	Schedule K-1 after conversion
Energy DST (oil and gas)	A beneficial interest in a trust that owns oil and gas royalty or mineral interests	Can qualify, depending on the interests held and state law	Set by the offering; income declines as production falls	Very limited until the interests are sold	Grantor trust statement of income and expenses
Qualified Opportunity Fund (QOF)	An interest in a fund investing in Opportunity Zone property or businesses	No; uses its own deferral rules	At least 10 years for the full benefit	Very limited; an early sale ends the tax benefits	Usually Schedule K-1, plus annual Form 8997
Non-traded REIT	Shares in a REIT that is not listed on an exchange	No	No set term	Limited periodic repurchases that can be capped or suspended	Form 1099-DIV

Holding periods, liquidity and tax treatment vary by offering and are set by each offering’s documents.

Which Structure Fits Your Situation?

The right structure usually depends on what you are selling, how much of the proceeds you need to reinvest, and how long you can leave the money in place.

Selling investment real estate

A 1031 exchange lets you defer capital gains tax by reinvesting the proceeds in like-kind real estate within strict 45-day identification and 180-day closing deadlines. A Delaware Statutory Trust (DST) qualifies as replacement property and offers passive, professionally managed ownership, which is why DSTs are often used by owners who no longer want to manage property themselves. See Delaware Statutory Trust (DST).

Planning ahead for a 721 exit

Many DST offerings are now designed with a possible exit into an UPREIT, in which the DST property is contributed to a REIT’s operating partnership in exchange for operating partnership units under Section 721 of the Internal Revenue Code. This can continue the tax deferral while offering broader diversification and, over time, more liquidity. The trade-off: once you hold operating partnership units, a future 1031 exchange is no longer available, and redeeming the units for cash or REIT shares is generally a taxable event. Whether and when a 721 exchange occurs is governed by each offering’s documents. See UPREIT, 721.

Adding oil and gas investments

Some investors add energy to a real estate portfolio through oil and gas investments. These range from royalty and mineral interests, which receive a share of production revenue, to working interests, which share in the costs of drilling and operating wells. Royalty interests can be held through an energy-focused DST, which in some cases can qualify as replacement property in a 1031 exchange, while other oil and gas investments are purchased directly with cash. Each type carries a different risk and tax profile. Income depends on commodity prices and declines as wells produce less, so oil and gas investments are generally suited to investors who can accept more volatility than income-producing real estate typically carries.

Selling a business, stock or other appreciated asset

A Qualified Opportunity Fund (QOF) accepts capital gains from almost any asset, and only the gain itself needs to be reinvested, generally within 180 days. Under the permanent program, which applies to QOF investments made on or after January 1, 2027, each investment gets its own five-year deferral period, and appreciation on the QOF investment itself can become tax-free if it is held for at least 10 years. See Qualified Opportunity Zone & QOF Investments.

Investing cash without a pending sale

Investors who are not deferring a gain often look at private real estate funds, syndications or non-traded REITs for income and diversification. These do not offer 1031 or QOF tax deferral, so the comparison comes down to the sponsor, the property strategy, fees, leverage and how long the money will be committed.

Planning for heirs

Under current federal tax law, heirs generally receive a stepped-up basis in inherited real estate investments, which can eliminate the gain deferred through successive 1031 exchanges. Because DST interests can be divided among heirs more easily than a single property, some investors use them as part of an estate plan. Estate rules are fact-specific, so coordinate with your estate attorney and tax advisor.

What Are the Risks, and How Should You Evaluate an Offering?

Private market real estate is an alternative investment, and its risks are real. Most offerings are illiquid, many use debt that magnifies both gains and losses, results depend on a single sponsor’s execution, and distributions are not guaranteed and can be reduced or suspended. Tax benefits depend on following the rules exactly and can be lost. Investors can lose some or all of their principal.

Before investing, look closely at:

• Sponsor track record: how past investments performed all the way through sale, including during a downturn, and how much of its own capital the sponsor invests alongside yours.
• Business plan and leverage: what the sponsor intends to do with the property, how much debt it uses, and when that debt matures.
• Fees: every layer, from acquisition to disposition, as disclosed in the offering documents.
• Exit and liquidity terms: the expected hold, how a sale or 721 exchange would happen, and whether any redemption program exists.
• Fit with your plan: how much of your net worth would be committed, and for how long.

How SREI Group Helps

SREI Group works with accredited investors and their tax advisors to compare private market real estate offerings across sponsors and structures. We walk clients through each offering’s documents, including its fees and leverage, help coordinate the timelines for 1031 exchanges and Qualified Opportunity Fund investments, and discuss exit options such as a 721 exchange before an investment is made.

Frequently Asked Questions

Private market real estate investments are alternative investments. They can be complex and illiquid and carry real risk, including the potential loss of principal. Nothing here is personalized investment, tax, or legal advice; please talk with your own qualified tax and legal advisors before deciding.

Talk Through Your Options

Tell us a little about your situation and Kenneth Millar will reach out to schedule a conversation about 1031 exchanges, DSTs, Qualified Opportunity Funds and other private market real estate.