I have a property now that at some point I am considering renting out. REIT vs. The added income helps sustain the purchase of the next property while satisfying lenders. 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. The first property was a whopping 20.5% Roi in a perfect year. Exceptions are there or course but do your research and buy a good deal. Cookies help us deliver our Services. I think that real Real Estate would be better because it will often appreciate. As in the stock increase over time? Which one will make more money? I think it could also be considered as a kind of inflation hedge but I am not sure about that. TL;DR - Jump-start your equity appreciation by taking out a loan. A real estate investment trust, or REIT (pronounced reet), is a unique type of company that allows investors to pool their money to invest in real estate assets. But buying a property usually means you have more leverage than REITs. Your minimal investment (down payment) allows you to start appreciating the asset immediately, at its current market value, rather than waiting for you to earn the entire market value before appreciating. New comments cannot be posted and votes cannot be cast, Press J to jump to the feed. Focusing on 200-300k multi-family properties. There’s also the cost of ownership ... in a REIT it well defined - the expense ratio - and for a home it’s less well defined due to repairs and maintenance. Press question mark to learn the rest of the keyboard shortcuts. Some REITs … Yup. I guess you could do a 15 year mortgage but then your monthly profits are a lot smaller right? Ideally, you put your REITs in your Roth IRA. REIT Investment vs Real Estate I'm not really a fan of owning real estate but like the idea of reoccurring income. Owning REITs gets you to roughly the same spot with less risk. Most people I know that own 15+ units use property managers, I doubt they significantly beat out REITs after the managers take their cut. There is no reason why REITs should make less return than you. A real estate investment trust is a company that makes debt or equity investments in commercial real estate. If you want to invest in New York City’s dynamic and notoriously pricey real estate market, for instance, consider the appropriately named … This is also the reason that you see less correlation to the market. Real estate investors can choose direct real estate investing or REITs, which offer many of the same benefits as direct investing. Of course you can make more money owning your own business. Plus repairs etc. 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. 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. Under liquidity risk, real estate agents will charge you 5-6% of the property value if you want to sell the the physical property vs. few dollars for trading REITs. The problem is that most people don't, and it takes a ton of work. Real Estate Investment Trusts (REITs) are traded like stocks on the market. https://www.forbes.com/sites/marcprosser/2017/07/19/data-proves-reits-are-better-than-buying-real-estate/#994d8dad6b7d, https://seekingalpha.com/article/4204857-reits-vs-rentals-best-way-invest-real-estate, https://fundrise.com/education/blog-posts/reits-vs-rentals-whats-the-best-way-to-invest-in-real-estate. With all the discussion about getting rich with rental properties etc. Investors can purchase shares in REITs … This is true. (since I wouldn't have much control over my property) I know you can hire a management company but they usually take 10%. Buying property require patience and a long term horizon due to the high transaction costs of purchasing real estate. But isn't having a property manager a fix for this? You didn't mention leverage being an advantage for real estate (mortgage) that is more difficult to realize with REITs (brokerage margin). It seems like to me that the REIT would be a better option since … I read this from another poster: "reits never call me at 3am to fix a leaking faucet". 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. 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. Also leverage is great, For the majority of people that just want to put their money somewhere might as well park in REITs. It depends of course. 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