Why I Stopped Buying Real Estate To Buy REITs Instead
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- čas přidán 28. 02. 2023
- 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. You can access my entire REIT Portfolio by taking a 2-week free trial to my REIT newsletter, High Yield Landlord: www.high-yield-landlord.com/
Please follow me on Twitter: / askjussi and subscribe to my CZcams channel.
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 CZcams channel is managed by Leonberg Research OÜ, a subsidiary of Leonberg Capital OÜ.
#reit #reits #realtyincome #passiveincome #realestate
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 :)
Face towards the window
@@SpliffMeister3000 I will next time :)
@@askjussi What reits do you recommend? I looked at vnq and it looked like it was losing money. Why not just stick with s and p 500 or total stock market etfs? Thanks.
@@mikem6796 VNQ is not a REIT ETF
. Oh no. I had about 10 people say it was. If you could list the best one what would it be?
As a former landlord I agree 100% with what you said. I was stuck in Houston because I was tied to the rentals. Those rentals stole lots of my weekends. Also, NONE of my investments have ever paid what my career pays, so it's true that's where my focus should be.
Thank you very much for sharing your experience. I appreciate it
Maybe you should've gotten a property manager!
All your problems would have been solved by employing a decent property manager. Hands off! I have multiple properties and the only check I do is the incoming rental income and outgoing mortgage payment every month.
I only own REITs and no rentals. I don't want this high level of capital concentration, love the better yields, and I don't want to have troubles with tenants (friends of mine who are landlords have unpleasent stories to tell..). Thank you Jussi for summarising all these reasons pro REITs in this video - very helpful, it confirms my own investment decision. I'm currently having around 20% of my portfolio in REITs, but I aim to raise this to 25-30% in order to improve overall portfolio yield. Since REITs are trading at low valuations right now, it seems to me it is a good time to buy. Just discovered your channel, it's very valuable. Thanks a lot for sharing your work! :)
Thanks a lot for sharing your experience. I appreciate it. Also, thank you for your kind comment :)
As a landlord of three investment properties and also a Reits investor, I am 100% agree with you. well said, Jussi.
Which reits do you own?
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.
Real estate investing is a low margin business and scale makes a big difference. Thank you for sharing!
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.
Thanks a lot for your support!
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.
Thank you so much for your kind comment!
Nice examples and explanation. Thanks a lot! Very informative.
Amazing breakdown jussi 👍🏼🙌🏽👏thank you for the information and education 👏
Thank you for your support!
Thanks Jussi for this very well done video.
I appreciate your interest!
Enjoyed the material. Just subscribed!
Great to hear :) Let me know if you have any questions
One of the best videos I've seen on the topic. Short and to the point.
Thank you so much for your kind comment!
Thoughtful video. Thank you!
I appreciate your interest!
Hi, Jussi! Greetings from Helsinki Finland and big shout out to your new channel. I've been following you in Seeking Alpha, so these vidoes are a fresh and preferred way to learn about REITS especially when on I'm on the road. If you take requests could you make a video on REIT ETFs? And please remember that some of us love with EU's tax rules and ETF availability. Yours, TJ
Thank you for the suggestion! I noted it down. Greetings from Miami. I will be at a major REIT conference meeting management teams over the coming days.
Very good points. Thanks!
Being a residential landlord is a pain in the ass.
I agree
They don't want to pay and you have to fix the dam place all the time
Nice video Jussi! Very informative. I am a REIT guy for sure. I have friends who have done very well with physical real estate, but have lots of headaches to go with them. I personally believe the biggest advantage of REITs is NO TENANTS to deal with! No doubt rental properties have some advantages vs REITs but I'm with you...keep life simple and enjoy the investment returns with REITs!
Yes, I think that the risk-and-hassle adjusted returns of returns are far superior. Thanks for sharing!
I'll give you one more pro. REIT dividends can be tax-advantaged once they become qualified dividends when the shares are held for one year or more. I'd be curious to know your opinion on non-traded REITS like those of Fundrise, Realty Mogul, etc. I actually prefer them most because they are insulated from the volatile gyrations of the equity markets.
I discuss this in a separate video: czcams.com/video/SLFK4YeJ-Hg/video.html&ab_channel=JussiAskola-REITInvesting
I think that it is arguably the worst option of all.
REITs are never qualified dividends but they qualify for QBID=20%
@@irinab7524 Publicly-traded REITS do indeed provide qualified dividends. I've been taking advantage of these for years. You are referring to non-traded REITS.
My friend had renter destroy the ceiling in unit to avoid paying rent.
Oh man, that's a common technique. Break something and claim that it was like this so you won't pay rent. REITs have good legal and administrative teams to handle such issues.
Totally agree. Excellent presentation.
Thanks
I will do both because I am doing AirBNB with my property I have now.
Thanks for sharing!
Great video 👍🏻
Only halfway through and this is very based and reality pilled right off the bat.
Thanks a lot for your interest!
I'm trying to diversify in real estate I love REITS and Rentals in NJ and some other states buying these assets under an LLC is the way to go.
Thanks! Remember that an LLC does not protect you from everything like REITs do.
@@askjussimanaging your own properties brings both risks and rewards
A lot more risk and less reward if you ask me :) @@TheSmartLawyer
Thanks for knowledgeable video. Which REIT platform are you recommend or which one are you use personally?
I personally use Interactive Brokers. Thank you for your support!
Very informative.
Thank you!
Wealth of Knowledge! THANK YOU!
I appreciate your support
Great content wich is better between Riets and BDCs?
Thanks! I prefer the business of being a landlord than that of a landlord.
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...
Thank you for sharing your thoughts
As a landlord, I agree with everything you stated. My only complaint with REIT’s is the feeling of being exposed to the broad market whereas values can fluctuate (as in a recession) in ways that have little to do with one’s particular investment.
Thank you for sharing. That's a good point. It can sometimes be frustrating if you fixate on daily volatility. On the flip side, it can provide some great opportunities for more sophisticated investors :)
What are the Best REITS
"Concentrated" not "Concertraded."
Would love to get some of the links to the studies you cite regularly.
Thanks for noticing the typo. I'll tell my editor :)
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.
Thanks for sharing your thoughts!
I agree. I wouldn't see buying rental properties as an investment. What you are really doing is starting a business.
Greater diversity, higher expected returns. REITs are a no-brainer.
I agree!
Sitting good. Standing, very distracting. Looking forward to your progress.
Can you please say 2/3 safest REITs long term in your opinion ?
Thanks a lot
I'll work on a video on that!
I have a Robinhood acct. Is that fine for building a dividend portfolio or is there a better option that does not charge fees?
That should be fine for buying REITs. I use Interactive Brokers
@@askjussi thanks 👍
I absolutely love investing in REITs.
I do too, thanks!
Question: What about taxes? With a rental house or vacation rental, I can depreciate and deduct EVERYTHING and end up paying no taxes at all. With REITS, the returns are taxed at my MARGINAL RATE (almost 40%!). Thoughts?
I pay less taxes investing in REITs than rentals. I have a video about REIT and taxes on the channel. Lots of misconceptions on this topic as well
@@askjussi Can you let me know the link to that video. I will watch it!
@@jonathanlusk9859 Just type jussi askola REITs and taxes. It should come up
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.
It can be very rewarding thanks. But I would argue that most of the returns are actually the result of your labor, not the investment itself. So it more like getting into a second job or creating a business
@@askjussi I do have to agree with you there!
@@masonholl3384 👍👍
@@masonholl3384BRRR doesn’t work well when rates for investment properties are around 10%
@@irinab7524 No sherlock. Tho, show me one investment/business which outperforms 100% everything and only goes upwards by a huge margin... Always ups- & downs, if such thing would exist everybody would buy/do that one thing all the time, right?
Can you pls recommend any reits on ibkr?
Please see my other videos. Thank you for your interest!
Buying rental properties was the biggest mistake we ever made
Thank you for sharing. Don't worry, you are not alone. What went wrong for you?
@@askjussi
Oh where to start.
Went and bout a few rental houses that needed a little work. Fixed them up and rented them out. Got a renter, great.
First month no problem, second month decided not to pay. Had to spend money to evict them. Then had to pay damages to the house. Got another renter, same thing happened and again and again. In the end we decided to just sell the properties for less then half of what we paid for them cause the money coming in twice as much was going out. 300,000 bucks down the drain. If I had known about riets back then I would’ve put it in there.
@@phsycopiano Thanks a lot for sharing!
What a good way to start into REITS (24 y/o M) I am military (active) I want to invest into a passive income why I’m still perusing my career in IT. I invest little into acorns and CD Bonds, I wanna get more into this. Thanks for helping the more I know the more confident I will be !
Apps to use and track
What good reits to invest in?
Benefits pros and cons
I appreciate your interest!
@@askjussi is there a app to use to start ? How do I got about starting looking into it more ,
@@AntChristian You simply need to open a brokerage account
There’s a guy on the radio named Del Walmsley and he said he made millions on rental real estate. He promises that he could make others rich and retire early.
Haha there are a lot of people who promise to make you rich investing in rentals :)
That’s something new. Not!
Best brokerage to buy Reits?
I use Interactive Brokers
What do you think walmart and walgreens are closing?
Most are doing just fine right? REITs that own such properties keep growing their rents
Cost averaging is infinitely more easy in REITs than in rental properties.
Good point
comment!
👌
I hold my REITS in a Roth so all my dividends are tax free.
Thanks for sharing. REITs make it very easy to defer taxes
Prefer QQQ over REIT index. REIT return is not even on par with SPY.
REITs have outperformed SPY and Tech stocks over 40 year time period
@@askjussi Which REIT fund is it?
If you buy real estate with cash, YES Reits are a better investment. If you buy real estate with leverage (bank loans) real estate is 10 times a better investment.
💯
I see a big problem. Psychologically speaking when the stock market crashes your reits will crash too. Most people will suffer looking at the paper value of their properties go down 40 percent
If you are not disciplined and patient, stay away from all stocks
It will recover
CAN i EDIT YOUR CZcams VIDEOS?
My younger brother is doing it as part of his internship right now. But thank you! :)
@@askjussi Ok no problem, let me know if you want in the future :)
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..
That is not correct. You do not need to take leverage when buying REITs. The REITs are already leveraged. You provide the equity. This is a common misconception.
@@askjussi the reit might be leveraged but my equity is not. And with this leveraged REIT you make a 12% ish return.
@@MrTyamat Yes it is leveraged. It is the same as putting a downpayment on a property
@MrTyamat It appears that they are both leveraged....with rentals they are usually leveraged way more but comes with more risk.. reits are more conservative in their leverage
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?
You are right. Technically, you could just buy a REIT ETF and be done with it. Or you could cherry pick the right REITs, perhaps with some help of a professional, and then be very passive. It does not require much work once you have the right companies to accumulate.
🤘🍻🤘
Thanks for your suppport!
The biggest advantage real estate has over REITs is that you can get a loan and use debt to buy the property. You can’t get a loan to buy $300k worth of REITs.
Watch the video. This is a common misconception. REITs are already leveraged. You are providing the equity when making an investment. REITs add debt to it and you enjoy its benefits.
@@askjussi I did watch the video I guess I still don’t understand. I need no money to get a house, I can finance it. If I have no money I can’t buy a REIT.
@@thetapheonix You need money to buy a rental income. When provide your down payment that's the same as when you buy shares of a REIT. You provide the equity
@@thetapheonixrentals are usually more leveraged and higher risk..
With a rental, you'll always realize the appreciation when you exit the investment. With a REIT, you'll never see that
I would say that it is the opposite as long as you have a long time period. Countless rental investors file for bankruptcy each year, but no diversified REIT investor has ever lost money in the long run
@@askjussi j
@@askjussi Reminds me of something someone said in a crypto course once. "You never go broke making money."
Reits are going to plummet. Be ready and good luck
Based on what? They are already priced at steep discounts to their fair value