Rental Properties vs REIT/Real Estate ETF

[Amar Modi]

I am comparing between buying rental properties or investing in REITs/real estate ETFs. From my understanding rental properties are better to invest in most ways financially. My specific situation is that I work in FAANG and receive high income for it. My concern with rental properties is the amount of work needed to maintain it (tenants, finding property manager, contractors, late rent, eviction, tax papers, finding more properties ). Is it possible to have almost no hands on except finding new properties? If not then I feel as if I'm better off investing in REIT or am I wrong?

[Alexander Szikla]

You can also look into purchasing commercial properties that are triple or double net. 

With a triple net property / lease, the tenants (i.e. McDonalds, CVS, Mom and Pop's Bake Shop, etc.) pay for all the expenses related to the property including:

1. Taxes

2. Insurance

3. Common Area Maintenance

With a quality credit tenant (i.e. McDonalds) you will certainly get the rent in a timely manner each and every month - however, there is a trade off to this in the form of lower yield. 

Comparatively, Mom and Pop's Bake Shop might provide higher yield - but those tenants usually sign shorter term leases. 

In either case, your big risk is re-leasing if/when the time comes. 

You can also purchase a small retail or office building where you still need to take care of the taxes but your tenants manage everything else. Just some food for thought!