Buying property require patience and a long term horizon due to the high transaction costs of purchasing real estate. REITs own or finance income-producing real estate. Hello fellow investors/traders, as the title says I am learning to invest in Real Estate via both tangible assets and REITs. REITs vs. REIT ETFs: An Overview . By using our Services or clicking I agree, you agree to our use of cookies. REITs are very attractive if you want to invest in real estate without having to deal with the time and energy of managing your own property. They are collections of real estate related assets. You can get a similar effect from a REIT by buying it, only looking at the price once a year, and even then looking at a lagged, average price (i.e. can also go down in value so its a double edged sword... Real estate is great if you’re a savvy investor and know how to find opportunities and or add value. #1 question when investing - Real Estate vs Reits: Which Investment is Better? Investors can purchase shares in REITs … A REIT is a corporation, trust, or association that invests directly in income-producing real estate and is traded like a stock. Real Estate Investment Trust (REIT) Definition A real estate investment trust (REIT) is a publicly traded company that owns, operates or finances income-producing properties. The first property was a whopping 20.5% Roi in a perfect year. Nothing beats vanguard Roth reit dividends. Learn more about REITs. I asked a question about diversifying across different REIT classes in … (since I wouldn't have much control over my property) I know you can hire a management company but they usually take 10%. If you buy a well priced home in a growing neighborhood let's say at 225k there's a good chance your investment will appreciate over the next 5-10 years. On the other hand, real estate ownership is full of tax loop holes. You can have more upside in a concentrated position. Focusing on 200-300k multi-family properties. Isn't this ignoring the fact that most people rent out their real estate holdings at returns typically >15%? Then you get the added upside of the property potentially increasing in value as well. Also leverage is great, For the majority of people that just want to put their money somewhere might as well park in REITs. Of course you can make more money owning your own business. I spend my 9-5 doing what I'm best at, and my savings get invested in a way that seems best but which doesn't demand too much of my attention. Also, I think most people forget that your home is considered a depreciating asset to the government. Owning multiple is a bigger job. The biggest pro of direct real estate is the ability to acquire leverage relatively cheaply. I asked myself this question a few times and decided to do some research and I feel like some users would like to know what I found about the REITs vs Real estate debate: - Less risk (diversified REITs funds will never go to 0), - REITs have management teams that have a lot of knowledge in the industry, - You don't have to find tenants, repair roofs, deal with tenants not paying/trashing the property, - Having the ability to buy small properties at a good price (large REITs won't compete to buy a $500,000 property), - You can live in the property you bought, - Ability to have a higher return if you buy at the right price. Essentially some or the majority of your profits will be non-taxable if I understand this correctly. $225k in an index fund will easily outperform $225k in real estate, historically adjusted for inflation the SP 500 gained an average of 7% every year whereas real estate only gained 3.7%. However the big difference is leverage. Sure it has the potential to be in a pain in the ass, but I'm not going to take on that risk unless the proposed return via renting is in excess of 15% -- otherwise it isn't worth it when you adjust for the risks we're discussing in this thread. Which would take forever to get 200k into a ROTH unless you yolo on some options and make bank in your Roth or u do a Roth backdoor 4 years in a row. Plus repairs etc. REITs are corporations that act like mutual funds for real estate investing. Also, renters typically make your mortgage payment, so you are free to invest your wage income elsewhere if desired. You get diversification and in theory less risk by owning a broad basket in the fund. As in the stock increase over time? Investors earn profits through dividends, which they then pay income tax on. e but the share price won't budge with my actions. Yea but you rarely make 40+% ROI off an REIT year after year. It depends of course. As you said they are much more liquid and don’t require huge investment to get started which is a great benefit. Ideally, you put your REITs in your Roth IRA. With all the discussion about getting rich with rental properties etc. When you calculate the future value of your investment, make sure you account for taxation. You also forget the standard 6% fee that occurs when property changes hands. It seems like to me that the REIT would be a better option since you can liquidate it easily and you make more per month in most cases. I can go out and buy 10000 cans of Coke but the share price won't budge with my actions. You can easily leverage REITs (and get low rates with IB). Owning REITs gets you to roughly the same spot with less risk. Real estate investors can choose direct real estate investing or REITs, which offer many of the same benefits as direct investing. You only know the price of your real estate when it is marked to market (and even then, only for certain when it is eventually sold), but you know the price of your REIT every second that the stock market is open. But isn't having a property manager a fix for this? Also managing real estate is much more costly and time consuming than investing in an index fund and most rental properties are not profitable. Yup. The term REIT is an acronym for real estate investment trust, which is a company that owns and operates income-producing real estate. I have a property now that at some point I am considering renting out. I'd list that for the first part, Added, dealing with this can definitely be a part-time job. Basically you have more liquidity when it comes to selling a REIT plus you get a property management team to run your properties. REITS vs Real Estate Let’s say you made enough to mortgage a 200k rental home or you could keep putting into a REIT until you hit 200k. Essentially you would make 2x as much on an SP 500 index than you would investing in real estate. The only problem is that when you sell your rental property you are taxed based on the new price (appreciated value of the house) - the (depreciated value of the house the government sees) But yeah, the control aspect is a huge point but what would you recommend for someone who wants to buy rental properties outside of the state that they will reside in? A bank will lend you money to buy the home. Cookies help us deliver our Services. It makes a big difference. Hypothetically, if I were to put 100k in a few REITs with 10%+ dividends, set a trailing stop loss limit of 10-15%, I feel like that's a much safer investment than owning real estate. Can’t the REIT itself appreciate? Reply Like (2) Jussi Askola Here’s a way you can invest in real estate with as little as $100…it’s a REIT. Real estate investment trust exchange-traded funds, or REIT ETFs, offer many benefits to a fixed-income portfolio such as capital appreciation and a stable source of dividend income. If you're worth > $1M and want a nice income stream it's great to diversify with real estate otherwise it's just a savings account with a lot more stress. Understatement if there ever was one. You didn't mention leverage being an advantage for real estate (mortgage) that is more difficult to realize with REITs (brokerage margin).

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