REIT vs Multi unit investing

[David Ma]

My question for all of you guys is that while some of you guys are investing in multi units that provide a rent income of 10-15% return. My question is why not invest all this money to Real estate investment trusts? Most of them provide the same amount of returns if not more. Why waste the time of going through all the hassle of it while you can just get a more passive income? Is it insecurities of not having something physical ?

[Cory Binsfield]

David, when own property directly, you make money 5 ways. Cash flow, appreciation, depreciation, equity capture, mortgage pay down. With a REIT, you only make money in two ways-cash flow in the form of dividends and appreciation. Direct real estate offers higher returns when you incorporate all 5 returns. Be extremely careful of REITS offering yields north of 5%. The market benchmark is only 3.2%. When I see a yield of 10-15% it means the portfolio is using massive leverage. There's no free lunch on Wall Street or Main Street!