Forbes article claims REITS better than investing directly

[Joseph M.]

Just came across this Forbes article . Some of the craziest parts of the article "For fix-and-flip investors, a rule of thumb is that you need to make at least 30% above the purchase price in order to be profitable. This is due to the repair costs and other holding costs. This means that while fix-and-flippers make $58k, on average, it can be a risky investment. For example, as much as 40% of all short-term house flippers sell at either a breakeven or loss." Where did they come up with the figure that as much as 40% of flippers lose money or break even ? "For long-term investments, investors are required to find tenants, deal with maintenance and upkeep, and sometimes even renovate the property before renting it." It's funny they completely ignore the option of professional property management . "For example, when people buy a property, they can typically only finance one at a time. This means that while you might be adding diversification to your overall portfolio, you have a lack of diversification within the real estate asset class. If you own a residential property and the residential market takes a dive, you become overexposed to losses." Huh ? Can only finance one property at a time ? The diversification complaint is strange too . If the residential market takes a dive you become overexposed to loses but if rents go down most likely stocks are going to go down and other types of assets . During the crash rents actually went up in many markets or at least stayed steady . It's crazy that an article like this could even be published. I wonder if the author is truly ignorant or if they actually know better. https://www.forbes.com/sites/marcprosser/2017/07/19/data-proves-reits-are-better-than-buying-real-estate/

[Caleb Heimsoth]

I mean some of it doesn’t make a lot of sense but a lot of it does. Flipping houses isn’t easy, and I bet most people sell at a loss of break even on their first couple. This is talked about a lot on the podcasts.

As far as the other stuff about buy and hold, yes that’s all true, but they don’t look at it from the perspective of property management like you said. But they are right about if you only buy a couple at a time you’re not really diversified.

REI isn’t a fool proof investment, it’s arguably riskier than the stock market due to the leverage. Leverage amplifies your returns but also the risk.