Parked my rehab reserve in a private REIT. The queue prorated me at 21%.

The detail that gets me is the balance not rolling forward. I'd have assumed unfilled requests carry to the next window as a matter of course. Does that vary by sponsor, or is resubmission the norm?

It varies, and it's one of the few places where the plan text really does differ between offerings. Some carry the unfilled portion, some cancel everything unfilled at the end of the period unless you say otherwise in writing, some let you withdraw at any point before settlement. @quarry the sharper question is what your prorata actually was. 21% fill against a 5% of NAV cap means requests that quarter ran near 24% of NAV. That's not a normal quarter. Did the sponsor say anything about what drove it, and did you look at the prior eight quarters of fill rates before you funded?

I'd push back gently on where you're putting the blame. The REIT did what it said. The thing that broke was pricing a gut rehab on the assumption the wiring behind the plaster was intact. That's a 71k overrun against 40k of contingency on a building type famous for exactly this. Fix that and the liquidity question never comes up.

@kestrel yes and no. Nobody prices knob and tube perfectly on a 1920s four unit, that's why the contingency exists. The failure was the contingency being 40k when the plaster hadn't been opened. But @quarry's point stands separately, because the reserve was supposed to be the second line and the second line had a 90 day fuse he'd mispriced. Two failures, they just happened to land in the same month.

New enough that I have to ask, why not just keep reserve cash as cash? What was the 85k supposed to earn that made the risk worth it?

@rigging that's the real question. @quarry, when you say no stated hard lockup after the first year, I'd want to see the exact wording next to the early repurchase deduction language and next to the board's discretion clause. In most of these documents the board can modify, suspend, or terminate the program, and the cap is a ceiling rather than a promise. A ceiling with a discretion clause above it isn't a liquidity feature at all. It's a courtesy the sponsor extends when conditions allow.

Reading this thread I finally understand why people keep saying illiquid means illiquid. I'd been picturing something like a 90 day wait, not a prorated 21% and a resubmission.

I'd separate the two buckets permanently and never let them touch. Operating reserve lives somewhere boring and instantly available, and its job is to be there on a Tuesday, not to earn. Long money can go into a vehicle with a queue because you've already agreed you won't need it. @quarry's real cost wasn't the 6,400, it was the sub walking and coming back higher, and you can't put a number on that until it happens. Thanks for posting the fill percentage, most people won't.