Why I Stopped Buying Real Estate To Buy REITs Instead

Why REITs earn higher returns than rental properties? REITs enjoy significant economies of scale. They develop their own properties. They skip brokerage fees. They do sale and leaseback transactions, etc. To give you an example: Realty Income $O has managed to generate 15% annual returns for its shareholders by buying Class A net lease properties with a conservative 30% LTV. Most private net lease investors would have been happy to earn a ~10% return.

Why REITs are safer than rental properties? REITs are liquid, professionally managed, diversified, less leveraged investments and shareholders enjoy limited liability. With the right adjustments, REITs are also less volatile than rental properties. 

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Image sources: Realty Income, NAREIT, EPRA, Cambridge, YCHARTS, Canva

Important Disclaimer: Leonberg Capital OÜ is long O. This video is impersonal and does not provide individualized advice or recommendations for any specific person. Viewers/readers should not make any investment decision without conducting their own due diligence and consulting their financial advisor about their specific situation. This video is for entertainment purposes only and you are responsible for your own investment decisions. The information is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The opinions expressed are those of the publisher and are subject to change without notice. This YouTube channel is managed by Leonberg Research OÜ, a subsidiary of Leonberg Capital OÜ.

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[askjussi]

Which do you prefer? REITs or rentals? Also, sorry for the bad lighting on this one. I am traveling and it was tough to find a good setup.
Please like and subscribe :)

[weideng]

As a landlord of three investment properties and also a Reits investor, I am 100% agree with you. well said, Jussi.

[MuzixMaker]

Being a residential landlord is a pain in the ass.

[Trojan]

My friend had renter destroy the ceiling in unit to avoid paying rent.

[YujinVasquez]

I follow you on SA, great to finally hear you on YT pumping out great content as usual. I own REITs, Syndications and sold almost all my rentals.

[projectndv]

Brilliant video!!! Thank You for putting this together for us. You brought up so many great points supporting the idea of REITs. Some that I had not even thought of myself, and I highly support REIT investment. I will be sharing this with as many folks as I can. You have a new subscriber, and I will go back and watch all your videos. Keep up the amazing work.

[deviildogg]

I fully agree. I eventually concluded that all the added expenses that go into the rental properties will eat into the profits. Aside from that you have higher risks when you directly own the property and deal with the tenants. I own 1 rental and a basket full of REITs and the later is much less of a hassle.

[jaredgraham]

I will do both because I am doing AirBNB with my property I have now.

[truth]

Whatever gives me the luxury to make money with little stress is always a better option for me. Real estate can only be a better option if treated like a business of buying, fixing and selling the property. Rental income cannot be assured over time though this is same for REITs both the multiple properties in REITs makes it better.

[dougbrunell]

Great video. I did a lot of research and decided REITS were far better financially and time-wise. I think a lot of people who buy rental properties buy one or two properties (and always complain about it), but it feels more "real" to them. The property is physical and the REIT is just "numbers." Buying physical property, far from being more rewarding financially, are more rewarding psychologically. And so many people make financial decisions based on feelings...

[bornowl]

Sitting good. Standing, very distracting. Looking forward to your progress.

[bersah]

Thanks Jussi for this very well done video.

[dipu]

Nice examples and explanation. Thanks a lot! Very informative.

[robertsugarland]

Totally agree. Excellent presentation.

[masonholl]

Great video! However, if you BRRR a property, the return is infinity. I don’t like dealing with rental properties but I do because of that sole reason, buy them cash, renovate then refinance and get all your money back.

[MrBaikolio]

Great video. One could argue that REITs are also not a 100% passive investment, since you need to spend time on picking good ones and managing your portfolio, especially if you're picking individual REITs. Therefore you're just creating a different type of work for yourself. How much time do you need to manage your own portfolio?

[samy]

Cost averaging is infinitely more easy in REITs than in rental properties.

[elshangurbanov]

Thanks for knowledgeable video. Which REIT platform are you recommend or which one are you use personally?

[MrTyamat]

A problem with REITS is that you cant raise debt as efficient. So you are stuck with your own input. And 12% of not alot is....not alot..

[natespnwadventures]

I have a Robinhood acct. Is that fine for building a dividend portfolio or is there a better option that does not charge fees?