by etienner
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:
Pros of REITs vs Real estate:
– Higher return on average
– Less risk (diversified REITs funds will never go to 0)
– More diversification
– REITs have management teams that have a lot of knowledge in the industry
– REITs are a lot more liquid
– Less capital required
– You don’t have to find tenants, repair roofs, deal with tenants not paying/trashing the property
Pros of Real estate vs REITs:
– 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
– REITs can be be expensive/inexpensive at times (valuations are volatile), property prices are not as volatile.
– tax deductions
– Possibility to have a higher leverage
– Lower correlation to the stock market then REITs, directly investing in real estate leads to more diversification
Obviously, I could be wrong and I could be missing out on a lot of points, feel free to comment and I’ll add your thoughts to the list!
Sources:
– seekingalpha.com/article/4204857-reits-vs-rentals-best-way-invest-real-estate
– fundrise.com/education/blog-posts/reits-vs-rentals-whats-the-best-way-to-invest-in-real-estate