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
For about 10 years ago I invested in apartments and rented them. It was ok untill I got a real bad tenant. Now I invest in REITS instead of owning rental properties. In my opinion it is really hard to get even 5% wins on rental. I invest instead in REITs and there are 3 reasons why I do that. 1. I don't have to take a loan to by REITs as I can by a smaller amount at a time. 2. I can sell all my REITs with a push of a button. With a apartment it takes more time. 3. I dont have to do any renovations or deal with tenants. REITs are much simpler to own and the return is better.
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.
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.
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.
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! :)
What youre saying doesnt make sense. If REITs took a hit recently, doesnt that mean the money has been moving out? And if your local env is too expensive, doesnt it mean much of the money has moved in? Why follow the money?
@@asw654 Correct on both. Not sure what the confusion is. REIT prices have gone down due to the trading dynamics, which were partially influenced by interest rates, so it's a good time to buy them. Conversely, So Cal real estate is expensive as hell, so unless you're a major player or an experienced syndicator with a strong network who can alert you to a good off-market bargain, buying as a mom and pop investor such as myself here doesn't make sense, unless you enjoy negative cash-flow.
@@TSK24692 The confusion might be because of your figure of speech or expression, "Better to follow the market instead of trying to fight it." Maybe there's some context to that quote, but to me it intuitively means to follow the market, and do what others are doing. If REIT prices are going down, I'd assume that's because the market / everyone else is betting against it. If an RE market is hot, I'd assume it's because the market's betting in favor of it. What you're suggesting now is actually betting against the market, and trying to lead it or preemptively go where you think it will in the future.
@@asw654 Got it and that's a very reasonable point. To clarify my point when I say "follow the market instead of trying to fight it", I believe in buying things that are attractively priced as opposed to buying things that aren't attractively priced. I see a lot of mom and pop investors eager to get into direct ownership because of the run up in prices and seeing how many people have gotten wealthy in the past 10+ years from accumulating rentals. Now of course, in the long run, buying additional rentals now will eventually pay off, but IMO it just isn't an attractive time to buy them. I see so many people trying to justify certain properties by "penciling in" some adjustments that magically allow them to cash-flow on paper. That to me is trying to fight the market. REITs, whose prices have been battered, are now a much more attractive option. Perhaps a better way of stating it would be "do what the market tells me to do".
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)
Right, but then you remain invested in real estate forever, even if real estate becomes unattractive as an investment. That's the downside. You end up stuck with real estate. Thanks!
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.
No that is a misconception. REITs enjoy the same benefits of leverage. What's traded on the market is the equity value. Also, the dividend yield is only low because REITs retain a substantial portion of their cash flow to reinvest in growth
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!!
Great to hear, thank you! You would need to check on the company's website or subscribe to a REIT service like High Yield Landlord. We have an Intelligence sheet that shows the management structure of every REIT. Feel free to join us for a 2-week free trial: seekingalpha.com/checkout?service_id=mp_1268
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?
@@askjussi Definitely always do my own due diligence! Do you know what the difference between net assets and book value is? Or are they different words for the same metric?
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.
Hi Jussi i feel like you are really not making a fair comparison as you also need to factor strategies of the real estate investor such as forced appreciation, pulling your cash out via cash out refi, doing 1031 exchange to trade up to larger buildings. There are many more things the savvy real estate investor also does giving them a much better return then say investing in REITS as you are more a limited partner earning a fixed income so to speak without the ability to take advantage of what the hands on savvy real estate investor can do
All of those factors that you mention also apply to REITs and are not unique benefits of real estate. All REITs utilize those things to improve your returns.
Dividend Stock, including RIET is the ONLY TRUE passive income Dividends/Riets are able to be double leverage.. As Jkussi stated AND your portfolio can also be leverage in ALL asset classes because you can borrow against it if you wish.. Dividends/Riets are MORE efficient and Effective Taxable due to 1 You can have them in your ROTH and ROTH 401K, 2. Holding LT, allows 0% to 15% taxed after 1 year and 1 day.. 3. No true interest stalls and political cares ever needed or bother by these thing, 4. You can NOT do a triple net leases EVERY TIME, We are all Triple net lease AND 5, 10, 15 year lease terms.... You are what??? Year to year??? Maybe 2??? Dividends/ REITS are 100% better in all case, UNTIL you add in personal preferences....
REIT's are not good growth stocks though. You take them out in the dhort term for the contributions paid out and then sell it before you lose capital value
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
For about 10 years ago I invested in apartments and rented them. It was ok untill I got a real bad tenant. Now I invest in REITS instead of owning rental properties. In my opinion it is really hard to get even 5% wins on rental. I invest instead in REITs and there are 3 reasons why I do that.
1. I don't have to take a loan to by REITs as I can by a smaller amount at a time. 2. I can sell all my REITs with a push of a button. With a apartment it takes more time. 3. I dont have to do any renovations or deal with tenants.
REITs are much simpler to own and the return is better.
Great addition, thank you! @@andersnordquist2350
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.
Thank you for sharing your experience. I appreciate it
What a nightmare ...
Well did the space aliens get him?
😆 🤣 😂
that's kind of hard to believe. do you have local news article or something to support that?
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.
Dollar cost averaging is infinitely easier and quicker in REITs versus rental properties.
Good point that's also underrated. You can immediately reinvest the cash flow. It is very efficient.
You’re providing such a needed voice! TY
Thanks a lot for your support! Let me know if I can help with anything
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.
I agree that liquidity is a major advantage that's greatly underappreciated
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! :)
Thanks for sharing!
What youre saying doesnt make sense.
If REITs took a hit recently, doesnt that mean the money has been moving out? And if your local env is too expensive, doesnt it mean much of the money has moved in? Why follow the money?
@@asw654 Correct on both. Not sure what the confusion is. REIT prices have gone down due to the trading dynamics, which were partially influenced by interest rates, so it's a good time to buy them. Conversely, So Cal real estate is expensive as hell, so unless you're a major player or an experienced syndicator with a strong network who can alert you to a good off-market bargain, buying as a mom and pop investor such as myself here doesn't make sense, unless you enjoy negative cash-flow.
@@TSK24692 The confusion might be because of your figure of speech or expression, "Better to follow the market instead of trying to fight it."
Maybe there's some context to that quote, but to me it intuitively means to follow the market, and do what others are doing. If REIT prices are going down, I'd assume that's because the market / everyone else is betting against it. If an RE market is hot, I'd assume it's because the market's betting in favor of it.
What you're suggesting now is actually betting against the market, and trying to lead it or preemptively go where you think it will in the future.
@@asw654 Got it and that's a very reasonable point. To clarify my point when I say "follow the market instead of trying to fight it", I believe in buying things that are attractively priced as opposed to buying things that aren't attractively priced. I see a lot of mom and pop investors eager to get into direct ownership because of the run up in prices and seeing how many people have gotten wealthy in the past 10+ years from accumulating rentals. Now of course, in the long run, buying additional rentals now will eventually pay off, but IMO it just isn't an attractive time to buy them. I see so many people trying to justify certain properties by "penciling in" some adjustments that magically allow them to cash-flow on paper. That to me is trying to fight the market. REITs, whose prices have been battered, are now a much more attractive option. Perhaps a better way of stating it would be "do what the market tells me to do".
I really liked this video. Not that many of the things are unusual/surprising. Sometimes it's just easier when someone says it aloud.
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)
Right, but then you remain invested in real estate forever, even if real estate becomes unattractive as an investment. That's the downside. You end up stuck with real estate. Thanks!
Thx Jussi I prefer RIETs it’s a lot less work
I agree. The risk-and-HASSLE-adjusted returns are greater
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.
No that is a misconception. REITs enjoy the same benefits of leverage. What's traded on the market is the equity value. Also, the dividend yield is only low because REITs retain a substantial portion of their cash flow to reinvest in growth
thanks
I’m subscribing , I like the REIT videos !
Thank you!
In Germany selling properties is tax free after 10 years for rentals, even earlier when you lived in it yourself.
But you pay high property transfer taxes, notary fees, etc. in Germany.
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!!
Great to hear, thank you! You would need to check on the company's website or subscribe to a REIT service like High Yield Landlord. We have an Intelligence sheet that shows the management structure of every REIT. Feel free to join us for a 2-week free trial: seekingalpha.com/checkout?service_id=mp_1268
Can we pay the taxes o n the reits through the dividend returns ?
Can you please do a video on Granite Riets?
Sure! I have not looked at it in a while. What's your thesis?
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?
Bullish on both but they are very different REITs. You are correct
Can I defer those taxes if I buy more stocks with the dividend?
You can if you hold the shares in a tax deferred account or if the dividend is classified as return of capital
How do you just a reits position on it debt? Affo per share? Debt to assets?
Debt to Asset and Debt to EBITDA are good metrics to follow
@@askjussi I am very influenced to invest by you and watch every single video you release.
I appreciate your interest. Make sure to also double check and do your own research :) Thank you for your support! @@bryce7502
@@askjussi Definitely always do my own due diligence! Do you know what the difference between net assets and book value is? Or are they different words for the same metric?
Book value is not accurate for REITs due to non-cash depreciation. Sounds good! :) @@bryce7502
Pure gold speech, share guys 👌🇧🇪
Thank you for your support!
Uk Market is down a lot right now see any good opportunities?
Maybe LAND.L?
Lots of them. Most REIT markets are down heavily and historically cheap
EPIC for me. They own out of town retail parks. Seem to be booming, cities don’t want shops with emission zones and parking charges
When a market is down is when there are opportunities.
Exactly! @@HepCatJack
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.
Likely towards the end of the year
Hi Jussi i feel like you are really not making a fair comparison as you also need to factor strategies of the real estate investor such as forced appreciation, pulling your cash out via cash out refi, doing 1031 exchange to trade up to larger buildings. There are many more things the savvy real estate investor also does giving them a much better return then say investing in REITS as you are more a limited partner earning a fixed income so to speak without the ability to take advantage of what the hands on savvy real estate investor can do
All of those factors that you mention also apply to REITs and are not unique benefits of real estate. All REITs utilize those things to improve your returns.
Excellent and spot-on rebuttal to the three misconceptions mentioned in your video presentation. Thanks, Jussi!
Thank you!
Dividend Stock, including RIET is the ONLY TRUE passive income
Dividends/Riets are able to be double leverage..
As Jkussi stated AND your portfolio can also be leverage in ALL asset classes because you can borrow against it if you wish..
Dividends/Riets are MORE efficient and Effective Taxable due to 1
You can have them in your ROTH and ROTH 401K,
2. Holding LT, allows 0% to 15% taxed after 1 year and 1 day..
3. No true interest stalls and political cares ever needed or bother by these thing,
4. You can NOT do a triple net leases EVERY TIME,
We are all Triple net lease AND 5, 10, 15 year lease terms....
You are what??? Year to year??? Maybe 2???
Dividends/ REITS are 100% better in all case, UNTIL you add in personal preferences....
Thank you for sharing your thoughts!
REIT's are not good growth stocks though. You take them out in the dhort term for the contributions paid out and then sell it before you lose capital value