New to Real Estate · Las Vegas, NV · Member since 2016 · 12 posts · 0 votes
REITs and Buy and Hold RE have similar returns, and in many cases, REITS surpass B&H RE after adjusting for risk. Also, in holding REITs you don't deal with tenants. So, assuming equal leverage and tax implications, what are the benefits of owning physical property vs. REITs?
Disclosure: I have very little experience in RE investing (1 condo and 1 SFH), so I don't know crap lol.
Rental Property Investor · Member since 2019 · 187 posts · 230 votes
7y
I think a lot of it comes down to the ability to add value. Unless you are an activist investor that can throw billions behind something in order to advocate for change, when investing in a REIT, you are largely along for the ride. As you stated, it does have its perks as you don't have the headaches of being a landlord or working with a property manager, and if what you are looking for is truly passive, a REIT may be the way to go.
With a REIT though, outside of a dividend, you're relying solely on capital appreciation. With buy and hold, though it can be passive in nature, allows for so many levers to be pulled by the more active investor to force this appreciation and unlock even more earning potential.
If your main goal is for that purely passive, diversified play, REITs provide a great option, but if you are looking to maximize the return on your invested dollars, though possibly more risky, getting into the mix as a buy and hold investor provides for the opportunity to accomplish so much more.
New to Real Estate · Las Vegas, NV · Member since 2016 · 12 posts · 0 votes
7y
@Brandon Roof I see what you're saying. There is more control, meaning there are more exits, which could lead to a higher return. Thanks for your feedback. Where do you invest? I am in Las Vegas.
Rental Property Investor · Member since 2019 · 187 posts · 230 votes
7y
@Account Closed I invest more in the Rustbelt in blue-collar communities outside of nearby metropolitan areas. I have also invested in REITs as well as they are so incredibly vast. Single-family, multi-family, college housing, commercial, industrial and healthcare properties, self-storage, data centers, cell towers, the list goes on and on. It's very unlikely for any investor to be involved in all those areas without REITs.
With their dividends being so substantial, I prefer to hold them in a vehicle such as a Roth IRA, which provides me the option to reinvest the dividends and not pay taxes on the gains (as long as I don't make any ill-advised withdrawals).