Are you investing in REITS?

Question

I would love to have a conversation with someone regarding their experience with REITs.   For example:

1)  What type of REIT are you investing in?>

2)  How long?

3)  What is your average return?

4)  Are you investing in one of these?

5) How did you get started?

6) More.

Thank you,

Karen

Omar Khan · Answer

@Karen Gordon-Brown If you're interested in REITS (I love them), save yourself the hassle and buy a REIT index fund. Don't buy individual REITS as you are playing with fire.

Account Closed · Answer

My exposure to REITs are held within Vanguard Total Stock Market Index Fund (VTSAX).

Joel Owens · Answer

Hey Jeff,

How long have you invested in REIT's? Debt or equity? What have the returns worked out to be for you on average versus their projections?

I have seen where REIT's one year can make 20% and the next make zero. I have not invested in them  personally yet.

Jeff Kehl · Answer

@Karen Gordon-Brown I have quite a few investments in REITs as well as own many residential properties and a few commercial properties directly. I also have some investments in private syndications which are sort of in-between those 2 ways of investing.

I think all three methods are good but each have their pros and cons. Most direct real estate investors will tell you they make higher returns than REITS because they have direct control of the investment. That likely is generally true however REITS offer instant liquidity meaning if I want out of a REIT investment I can liquidate it tomorrow. Whereas a house or apartment building might take me months or years to sell.

Also REITS let you invest smaller amounts if you want. You can put $5000 into mobile home parks, $5000 in shopping malls, $5000 in apartment buildings, $5000 in medical offices and $5000 in self-storage for instance rather than $25,000 in one single family home.

REITS should theoretically return less because you're paying for a professional management team that has years of experience with that type of investment. If you do it yourself, you don't have to pay yourself but you're also more likely to make a mistake.

Also, keep in mind that since most REITS are public companies they have to publish audited quarterly reports telling you how much money/return they made or lost for you. A buddy who is 'making 20-30% returns' in direct Real estate investing is not giving you audited financial returns showing you that.

There are good and bad REITS just like there are good and bad investment properties you can buy and there is also a certain amount of luck with each. Both will be hurt by a downturn in the economy and be affected by broad market trends.

A lot depends on your personality and goals. I love directly investing in properties and will probably never stop doing that but I'm also starting to get lazy and not want to be bothered with so many details of direct investing so I'm also ramping up my investments in REITS and syndications so I can let others do the heavy lifting for me.

That makes me think of one final benefit to REITS over direct investing. You can't be sued by tenants like you can if you directly own the property.

BP is a website for direct property investing so you can get a lot of advice here about direct investments in property. If you're interested in advice on REITS I suggest you check out some other sites like NAREIT and Seeking Alpha.

Ron Fiscus · Answer

To be fair we need to consider the risks with rental property as well.  I wont waste everyone's time hear, but if you want to hear how bad things can go with a rental property, feel free to contact me at (the website didn't allow me to post my email).  Just trying to help give a balanced view.  I have had plenty of good rentals, but please consider how things can go out of control and consume your life and money.  I will always have rentals until I fully retire, but be careful and consider the possibility of what can go wrong.  For one small snapshot, consider spending $12,000 on bed bugs in one year.  I can tell you that was never included in any of my (or the professionals) pre-purchase projections.  And may more.  Best wishes for all in their future investments, go make lots of money...it's good for you and our country.

Joel Owens · Answer

Have to be careful with REIT's as they can be highly cyclical and have wild swings in returns over time due to how they operate.

Are you investing in REITS?

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