Investing in REITs vs Rental Property

There are both pros and cons with investing in REITs and rental properties. I found myself asking the question "should I invest in REITs or a rental property" many times when I first started learning about investing for passive income. The fact of the matter is, they both come with their pros and cons. In this video I share some of my own experience investing in both REITs and physical rental properties.

REITs pros 6:45
1) Liquidity
2) Instant diversification
3) High dividend returns

REITs cons 9:42
1) Lack of control
2) Dividend cuts
3) Tax inefficient

Rental Property pros 12:30
1) Leveraged returns
2) Tax benefits
3) Access to capital

Rental Property cons 16:04
1) Barrier to entry
2) Concentrated risk
3) Murphy's law "Anything that can go wrong will go wrong."

I'm not a financial advisor and the content discussed today is merely my opinion and intended only for your entertainment. The content expressed in this video should not be considered as professional financial advice. Some of the links above are affiliate links and come at no cost to you.
#FIRE

[DividendGrowthInvesting]

Do you prefer investing in REITs or rental properties?

Dividend Reinvestment Calculator:

[Dirty__Dan]

It’s smart to sell your rental properties now, while they’re super massively over inflated in value. Lock in those gains while you can. Then rebuy on the dip when the market eventually bottoms out in a few years.

[arigutman]

Solid breakdown and I think investing into REITs is perfectly acceptable for those without the capital to buy physical property.. REITs allow the benefit of acting like a landlord receiving rent payments, but not having to do any of the heavy lifting so to speak... My REITs of choice: Realty Income, STAG Industrial and Store Capital!

[simonbaauw]

Exact same experience with these channels here!
Graham and Kevin have shifted from personal real estate experiences to broad audience news and entertainment. Bigger Pockets has useful knowledge to offer. Ben Mallah is just the best! He manages to combine real experience with his entertaining character.

[taylordecell]

QUALITY OF LIFE. I watched my dad be a small time landlord. I’ll pass.

[gedenirfiorese]

I’m planning for both. Having a good amount in REITs, and a couple of rentals managed by a property manager.

[stefandebruijn]

One important thing to remember (that was not mentioned) when investing in REITs is that they issue often equity to acquire new properties. So your ownership % in the company will go down over time if you don't reinvest dividends or keep investing in the REITs. This is not a big problem but it is completely different from a lot of "normal companies" that are doing the opposite in the form of share buybacks.

[preciousgrl]

I love that we follow the same youtubers lol. And I agree with both Kevin and Graham. Their new videos are not as good as it used to. Our Rich Journey is my ultimate favorite, because I see a lot of similarities with my family with theirs.

[neelrastardust]

I love watching Our Rich Journey! No rental properties for me. I’ve heard of nightmare stories trying to get rid of tenants. The pandemic didn’t help with my views either.

[Melanie]

Lack of control is exactly why I love REITs…having to “control” rentals is a pain

[Drunken_Pilt]

I'm planning to invest in a rental property in Hawaii. I travel to Hawaii a lot and that triggered an idea . Hopefully I know what I'm doing, or else I'll end up like the meme in this video lol🤣🤣.This will be my first ever physical rental property. We'll see how it goes. Wow your son is already 1yr old!! I remembered he was just born a few weeks ago 😆 . Cheers Jake🍻

[cancel.lgbtq.]

Currently I have REITs with Vanguard but I've been saving up money to buy rental property for passive income. With the crazy housing market right now. I'm just going to hold off on buying it.

[coocoocachooglin]

One thing you didn't touch on is buying into syndications. I have several investments in commercial residential multifamily property syndications (think 100+ unit apartment complexes) from different operators in different geographies that are currently doing well - even through the scamdemic. But they have their pros and cons also. Just another real estate vehicle. I sold my residential rental and used that equity to buy into them, so now I don't have do deal with tenants or toilets, I just send them a check when the deal starts up, and they send me quarterly checks, annual K1 statements, and then wait for refi and/or sale proceeds and do it again, kind of a snowball effect over time. Averages around 5-8% CoC + whatever the ROI on sale are, I've seen some big sale numbers, but I don't have any idea how the future looks for returns. Compressing cap rates, people are paying huge sums for deals with no expectation of returns, they are basically just land banking which makes it harder and harder to structure a profitable cash flowing deal.

[raziel]

I have 4 rental properties and have a decent portfolio also, very good informative video, thanks.

[rrufio]

Liquidity can be both Pro and Cons - Warren Buffet once said Liquidity makes people do dumb stuff cos its an easy access to capital when things goes soar.

[dynamics]

what a beautiful channel. thanks for uploading such a great video. subbed and liked !^^^!

[jumbothompson]

I have one small rental property and that's about it for me. I've thought about this a lot and I prefer dividend paying stocks. Not necessarily REITs but just about any good company/fund that pays a dividend. I'm not knocking real estate. My investment is doing just fine at the moment but I know if I got more properties it would simply be too much of a headache for me. With dividends it's basically set it and forget. I can turn off my phone and go on vacation for two months and nothing will change. With rental properties you don't have that luxury. Sure you can potentially make a lot more on real estate but it comes at a price.

[supersteve]

I have about 10 percent of my portfolio in REITS (I'm retired). I hold it all in my Roth IRA so it is tax efficient for me, as I pay zero taxes. Haha. I started with individual companies, but just found it easier to stick with an ETF (VNQ) so I didn't have to pay attention. While I do still have a few individual companies, I am gradually selling them and adding to VNQ. I really enjoy your channel.

[bettymak]

What do you think of real estate fundcrowding ?

[averageinvestor]

Thanks for the video, I've been having this question in my head for a month now and couldn't find anything this complete