REITs vs Real estate

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:

– www.forbes.com/sites/marcprosser/2017/07/19/data-proves-reits-are-better-than-buying-real-estate/#994d8dad6b7d

– 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

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