I usually sell my REITS after I've made a 15 to 20% capital gain, and usually regret it. Thanks for the input. Having used rental properties for around 10 years, my vote is in favor rentals than REIT. Investing In A REIT, Part II. ... Is it a smarter move to buy property directly or to buy shares of a real estate investment trust (REIT)? However, it requires significantly more effort and is a lot less liquid than a REIT investment. Do the dividends tend to drop more than a rental property would? In this post I take a look at the pros and cons of investing in REITs vs. rental properties as ways to generate income, along with why I tend to prefer one approach over the other. Alternatively, if one bought the $450k property and rented it out, at least the mortgage might be completely or close to paid for by the tenant (or roommate). We look at historical returns so you can decide which is a better investment. VNQI if you want to go international. REITs … This is a great article which goes into a lot of depth on this topic: http://www.fifighter.com/finance/real-estate-thoughts/2014/04/reits-vs-rental-property-comparing-apples-to-oranges/. Therefore, when choosing an REIT vs. real estate property, investors may be better off pursuing both. Rental vs. REITs: Taxation When it comes to taxes, rental properties are more tax efficient than REIT investments. When you buy a reit, you know what exactly you are buying. I mentioned swapping over to a REIT ETF just because it seemed like a reasonable comparison in that they are a similar asset class (vs. comparing my rental property to Peruvian mining … This isn't possible in all markets and some have very high barriers to entry like NYC or SF where property prices are astronomical and there are many overseas all cash bidders for every property shown. Crowdfunding allows entrepreneurs to raise capital for projects from a large group of … Compared to rental properties, REITs provide a much more affordable way to invest in Singapore real estate. VNQ will get you there dirt cheap. IN individual rental, you realize the value fully when you sell it. The work required to manage multiple properties doesn't scale proportionally to the number of properties that you own, whereas the the revenue does. (1) Low Barrier of Entry (REIT) vs The Power of Leverage (Rental Property) REIT: With a minimum lot size of 100 units, almost anyone can afford to gain exposure in real estate by investing in REITs. However, the degree to which these tax advantages can be realized depends on the specifics of the investment vehicle. 2014 proved why they are important in an asset allocation. REIT's are more convenient than rental properties. Rentals are a headache but a worthwhile headache in my opinion. Press question mark to learn the rest of the keyboard shortcuts, [FIREd at 33 in 2013 in Raleigh NC][FI Blogger][married, 3 kids], http://www.fifighter.com/finance/real-estate-thoughts/2014/04/reits-vs-rental-property-comparing-apples-to-oranges/, http://jlcollinsnh.com/2014/05/27/stocks-part-xxii-stepping-away-from-reits/. Diversification is another … That has to come at a cost, in the form of lower yields relative to owning your own property. As an example, at RM1.19/unit, one could start to invest in YTL REIT at just RM119 (RM1.19 x 100 units).. As a REIT investor, you get to collect passive income without doing much at all. The advantages of a REIT are 1. The possibility of getting a higher return on your money if you chose properties wisely. Which gets you a better return? When market crash, it affects everyone including your tenants and their jobs. I may get back in the game later if I get bored or want more money. Rent may come down, worst case 20% down on rent, vacancies may increase...etc plenty of risk involved with individual rental. Someone please correct me if I'm wrong, but the biggest benefit I see to investing in real property vs REITs, is that it's easy to get a loan on it. REIT's are more convenient than rental properties. REIT investing allows for sharing in value appreciation and rental income without being involved in the hassle of actually buying, managing and selling property. I'm guessing you get much higher leverage for your money on real estate than REITs, but I could be wrong. However, it requires significantly more effort and is a lot less liquid than a REIT … Rental properties. As the co-founder and CEO … In REIT company makes mortgage and you can not leverage (or margin cost is too high). Am I just as likely to see rental income go down as I am to see REIT dividends go down? I've owned rentals for brief periods, made pretty good money, but it was a hassle. New comments cannot be posted and votes cannot be cast, Press J to jump to the feed. I guess my main question was whether rental income was less correlated with the market. Yeah: I guess my question is too general. At the trust level, REITs are exempt from income tax. YMMV of course. REITs have historically strongly outperformed private real estate. I've read a fair amount about the pros and cons of owning a few rental properties vs. investing in REITs. Essentially, a REIT functions like a real estate mutual fund, but can be bought and sold like a typical stock. VGSLX and VGRLX? The term REIT is an acronym for real estate investment trust… I think you should do more research and pick a few that you're interested in - such questions are probably only answered on a case by case basis. A rental property is a small business, which means costs like a mortgage, maintenance or building improvements can reduce the amount of income subject to tax. of course such yields may not last forever, mismanagement may lead to a cutting of the dividend or something... both of them, if you follow the graphs and look up their old files, were impacted by the housing crash of 08, VNQ, the vanguard REIT ETF, dropped as well during 08, REITS, in general, tend to be highly leveraged due to the need to heavily borrow to finance the acquisition of new properties, A person buying on their own likely has as much if not more leverage, REIT's don't need to borrow for new assets. Only issue is that your need to have right location, that comes with your own research and experience. And it's less random than the stock market IMO. As long as you know those things, it seems like you still know exactly what you're buying :). In my area, that condo would rent for approximately $1500-1800/mo. 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