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You are exactly right OP. REITs are the way to go if you want to diversify your portfolio with real estate. I think many are simply investing in what they are comfortable with and know to be real (physical real estate). REITs (and stocks, ETFs), can seem arbitrary and unfamiliar to some, so they stay away.
Personally I’m a stock market person because the income doesn’t get much more passive than this.
Same!
I am not into investment properties, but I am sure the ability to obtain cheap leverage plays a role.
Please explain ?
I invested in REIT’s before (and I’m invested in some currently). Advertised returns were nowhere near actual returns. Now I have a few properties of my own and although they’re a bit more work, the returns are much better as well as entirely within my control. I won’t be investing in REIT’s moving forward as I don’t trust them to be ran in the favor of the investors.
@MD1: mostly network based (from B-school). It’s not hard, in my opinion, to find a syndicate since it seems like everybody and their brother is syndicating a multi family. The hard part is finding someone you can trust not to be a dumbass, and someone you can trust not to abscond with your money. The investment ain’t hard - buy class Cish multi family and stick on some technology to reduce costs and some capital to bring rents up. Finding the people who can execute has been my hardest challenge.
I’m not into it, but I generally get the idea:
- very stable value
- you pay 20%, or maybe even less. So, 40k in the market may grow at 7% = $2800 in annual gain vs 200k at 3% = $6k. This is the low end, so while a renter pays the loan, you get the gain. I see this as a wash after repairs, closing costs, etc.
- tax savings for depreciation, mortgage deductions, etc. on income
Agreed except for the liquidity part
What are the returns people here are getting from their investment properties?
Depends on how you account for them. My cash-on-cash return is only around 5% per year, but that comes tax free due to depreciation, and one property has already appreciated 50% cash-on-cash (unrealized) in 9 months. The fact that you can roll your gains over tax-free via 1031 exchange also saves you 15% in taxes over other options like stocks.
Overall, 15% to 20% in untaxed gains isn’t uncommon with real estate properties.
Also curious. And it's hard to find profitable properties where I live
Aren’t REITs extremely tax inefficient also?
Physical property has good tax shelter capabilities and returns are higher than reits I’m getting 20% and can borrow against it if needed.
Coach
They can give a great amount of stability and there are several great tax benefits.
For my locations it just doesn't work well for me so I've shy'd away from it.
Getting into crypto early enough and staying committed (buying and holding)_ has given me enough fantastic returns for me to not care as much about this opportunity.
I still do want to own real estate for diversification purposes and probably turn it into a rental property if I move into the suburbs somewhere
Whi said you need to invest in the same market you live in? All of my real estate investments are out of state.
Real estate and Roth accounts “according to me “ are the two best investment instruments anyone can leverage.
- tax benefits that help you cancels your regular w2 income interns of depreciations and write offs and my first fav things of real estate
- tenants pay your emi s fully and your get to write of the interest paid from your income , taxes from income
- even though you make positive income from renting out you never ( almost never ) have to pay taxes.
- value appreciation over the last 10 years is fantastic , not sure of it will keep up. But if history comes true it will be .
- over long term rents goes up and they are usually inflation proof component which many other investments do not have.
Finally I feel bad I did not add as much as properties when I could, when I think of this factor - just imagine the cost of construction of the home you are in right now in 10 years , based on how prices are ticking up.
Most investments over a long term horizon is a winner and if you are already into stocks and crypto then real estate should be your next best diversification you can have to fight inflationary risk.