June 7, 2013 Comments (0) Publications

Kiplinger: Beware These 5 Problematic High-Yield Investments

When Pat Conway invested the majority of his life’s savings a few years ago in two non-traded real estate investments, he thought he had secured his retirement once and for all. Behringer Harvard Short-Term Opportunity Fund and Behringer Harvard REIT I yielded 3% and 7%, respectively. Moreover, his broker vowed that double-digit capital appreciation would surely follow, so Conway reinvested most of his dividends in the ventures. “That was my anchor for retirement,” says Conway, 66, a retired computer programmer from Lenexa, Kan., a suburb of Kansas City…

Like most products on this list, non-traded REITs are typically sold with a number of upfront charges, including commissions, which can reach as high as 15%. “In order to earn back your principal and achieve the desired return, the investment has to be risky,” says D. Daxton White, a lawyer in Chicago who represents investors in disputes. Non-traded REITs may return principal or take on debt to fund payouts if they don’t earn enough from operations.

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