Why I Stopped Buying Real Estate To Buy REITs Instead

Why REITs earn higher returns than rental properties? There are 10 reasons. In short: 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.

reits vs real estate, reit vs real estate, reits vs rental property, reit vs rental property, stock market vs real estate, stocks vs real estate, best reits to buy, best reit stocks, grant cardone, investing in reits, real estate investment trust, real estate vs reits, reit, reit investing, reit risks, reit stocks,reits, the risks of reits, the risks of rental properties biggerpockets, top reits for 2023, graham stephan, passive income, Income property

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.

#reit #reits #realtyincome #passiveincome #realestate

[askjussi]

Which do you prefer? REITs or Rentals and why? Let me know below.
Thank you for all your support. All your "likes" help me a lot to grow the channel. Thanks!
Jussi

[alankcpa]

When I helped with my parents' rental properties, I met some of the worse people on the planet. It didn't help that California was in their corner. I was glad when they finally sold out. A young woman (newby) purchased a house in our neighborhood for an investment. She rented out the house. Her tenant fell behind in rent. He wasn't answering her calls. She went to see what the story was. He had cut out the floor and floor joists in the livingroom and excavated 20 feet down. She asked why. He said he needed to build a bunker to hide from space aliens. The repairs were $80, 000.

[handsomestrangr]

Hahaha. I was getting salty cause I thought you were copying an article I read recently on bigger pockets about the same subject. Then I looked at it and realized you wrote the article. Saltiness gone. I enjoyed this a lot and the ideas you presented have helped me let go of my desire to buy a lot of property. I’ve been looking at reits and I think that will be a better route for me for the reasons you mentioned here.

[samy]

Dollar cost averaging is infinitely easier and quicker in REITs versus rental properties.

[martingreenberg]

Thank you for this video.

At ~ 6:00 you mention depreciation as a way to shelter current income. True. Then you lower your tax basis and pay the taxes upon the sale of the property. A professional real estate investor wouldn’t just sell the property. Most likely they would do a 1031 exchange. This postpones the taxes and the investor gets to depreciate a larger property. Continue until you die and heirs receive the properties at the step up cost basis. A tough way to get a tax break.

I am looking for monthly income and growth. REITs seem like they have a place in my portfolio.

Mask On Nurse Marty (Ret)

[hustensaftvernichter]

I think the main point is very straightforward: Liquidity.

Also, the entrance threshold is singificantly lower than ownership.

In German, there is a virtually omnivalent legal clause that applies to pretty much everything you buy and keep: ''Eigentum verpflichtet.'', which means ''Ownership obligates (the owner)''.

This can become a huge problem with real estate and more often than not, bites you in the butt with current interest rates and the mortgage market. A REIT owner cares about that: The REIT. That is it. He does not care about the roof starting to leak, the cabling becoming obsolete, a window that does not shut all the way or a toilet that does not flush correctly. The real estate owner is not going to sell the house once these problems come up -but they will, at some point or another. At that point, he is obligated to do something about it, and with current prices, he might get a 5 percent ROI after tax (which is considered ''high'' in Germany at the moment) despite all the headaches he went through, just to find out that once the roof is fixed, the plumbing needs to be redone.

REIT= Instant liquidity and none of the hassle I mentioned. Is buying a house or flat bad? No; It is not bad when you consider it what it is: Shelter. If you do not intend to live in a home, my take is that you should not buy it.

[TSK]

I refuse to invest out of state because I've done it before and I just don't consider it a sustainable way to build wealth. But locally, there isn't a single property that makes sense for a Mom and Pop investor like me. REITS took somewhat of a hit in recent times, but that just means it's a great time to buy them. Better to follow the market instead of trying to fight it. Direct ownership makes no sense right now, and REITs are priced attractively. You do the math! :)

[rawmean]

You’re providing such a needed voice! TY

[BenjifocusTV]

Can we pay the taxes o n the reits through the dividend returns ?

[samiremes]

I really liked this video. Not that many of the things are unusual/surprising. Sometimes it's just easier when someone says it aloud.

[mrx]

In Germany selling properties is tax free after 10 years for rentals, even earlier when you lived in it yourself.

[MrDavkou]

Regarding the leverage of the REIT, I think you miss something. When you buy 100 of REIT you get let’s say 4% yield. If you put the same 100 on a RE property to buy a 300 property at the same yield your in flow is higher at 12 compared to 4 . For the same equity on one side you get 4 and on the other you get 12. After the costs are different meaning the interest, property costs… eat some of your 12 but if you do well, your maths overall the rental income should repay a part of the property and leave you at the end of the mortgage with a property of 300 plus potential appreciation. The ROI will depend on the level of costs needed for the maintenance but again it is a question of math and due diligence on the property purchased.

[rexrandall]

Thx Jussi I prefer RIETs it’s a lot less work

[Ali-Muscle]

I’m subscribing, I like the REIT videos !

[ljragsandfeathers]

Wow! Great information, Jussi, as always. I really am enjoying your take on undervalued REITS right now and your assessment of the various costs and advantages. In one of your videos, you mentioned the difference between REITS that are managed in-house and REITS which outsource their management. Is there a quick way to check this in their investor information brochures? Or do you find it out some other way? Thanks so much once again!!

[jakisfinn]

Hi what’s your quick opinion? NNN or WSR, both are cheap but I feel I might prefer NNN as they have better track record so it feels less risky, but I wonder if WSR provides more risk, more reward?

[ProLawnSolutions]

Can I defer those taxes if I buy more stocks with the dividend?

[bryce]

How do you just a reits position on it debt? Affo per share? Debt to assets?

[pradeeshma]

Can you please do a video on Granite Riets?

[kookiebush]

You should get ahold of that guy from Stag again and ask him when the heck they are going to raise the dividend in a meaningful way. It's just so laughable.