Why I Stopped Buying Real Estate To Buy REITs Instead

I stopped buying real estate to buy REITs instead because they earn higher returns with lower risk in most cases. Example: Realty Income (O) has managed to generate 15% annual returns, but most private net lease investors would have been happy to earn a ~10% return with the same strategy. 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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Important Disclaimer: Leonberg Capital holds positions in BSR. 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.

#reits #dividend #passiveincome

[askjussi]

Make sure to subscribe to the channel as I will soon discuss some of my favorite REIT investment opportunities. Thank you for all your support and let me know if you have any questions.

[ronpizur]

I wish that I could "Like" this video more than once. All of the points that you made are right on. To me, the biggest reason not to own your own rental properties is because it is like having a second job on top of your already full-time job. Who needs that in their life?

[ivanxyz]

I had owned rental properties for 20 years. I agree with everything you said. REITs are much better than owning properties. Good video.

[theTECHYnewb]

Incredibly well done video. Completely agree on all counts. I've had rental properties and I sold them all off over the years and will not get back into that business. Not worth the headache, your money is tied up and at much more risk. I absolutely love REITS!

[davidwysocki]

Good video presentation, Jussi, on rentals vs REITs. And you're spot-on! I would never own rental properties. REITs have been great long-term, liquid investments for me for the past 20 years. Good stuff!

[SideWays]

Rentals done right are powerful, but you make excellent points for REITs. Doing rentals right is not easy. Do both maybe.

[gribinvon]

I started to think this when I learned more about REITs not having to deal with any tenants

[christophdenner]

This is such an excellent channel. Thanks for your work, Jussi!

[shadykable]

I am 33 I only discovered REITS recently. Most of my savings go directly to mutual funds but now I am also considering putting some of my savings in REITS on the side as returns still beat what I would get with mutual funds. Besides I do not have enough money to buy physical real estate

[sagig]

This is such a good video Jussi. Thank you !! I used to rent properties and it was too much headache for me. I'm also not a professional and so used to hire a management company which I was disappointed with. There are many hidden expense. I feel that doing it yourself is a good option for very savvy folks who will also dedicate much time for this. Since I'm not, I prefer REITs. I prefer investing in managements who do this for a living. Also, I get much broader exposure to different markets and different assets which otherwise I won't get. Thanks much for the video Jussi.

[johnwalker]

Excellent work. Also: In Australia, buying property involves paying a state tax (stamp duty) $42K for a $1M property and selling property involves selling agents fees. REITs do not have these costs and you can sell 10% of your REIT if you need the money, hard to sell 10% of your investment property. The capital gains from selling REIT investments is treated the same as for investment properties.

[jgonz]

Has to be the right REIT. I dumped my last financial planner, because the returns were shit. I only do my own investing now, but managed to find a good financial guy and he turned me on to some really good REIT’s with awesome returns

[mihneaciurea]

Very good presentation. I should send this video to my friends

[HoanZone]

I saw the title and said "I'm about to learn something" and you didn't disappoint. I have invested in millions of dollars into real estate and never considered reits for all the reasons you covered. Your points for reits are solid!

[meyroakabigrem]

Fully correct. Worth adding that property investors are also often leveraged way more than REITs are. That can provide upside but also has a lot more risk.

[Kashmir]

I actually like long videos like this with a lot detail and breakdown

[theodoroseidler]

I was extremely fortunate with my rental warehouse. But I realize a lot of it was just luck and good timing. I took care of me during the pandemic in a way the same amount in REITs wouldn't have. But your points are all very valid.

[djayjp]

The risk adjusted returns of REITs are terrible vs buying real estate yourself. REITs have the same volatility of any other stocks.

The value is determined by property assessments and that is what banks use. That's what matters. That demonstrates that volatility of private RE valuations is much much lower.

[kenth]

I have looked thru a lot of comments below, and did not see the one real reason REITs are better. You do not have a renter call you at 1 am telling you the toilet has stopped up. And if you want to get more leverage, borrow money and buy REITs.

[nexustech]

Even in country like Msia where blue colour labour is affordable, the cost of managing rental properties is still not feasible. Better stick to Reits and gain total return of 6 to 10% per year.