REITs v. Direct investing in real estate

[Kevin Humphreys]

My question is pretty basic.  What are the main reasons why investing directly in real estate is a better idea than just investing in REITs.

My understanding is that the rate of return on REITs is generally higher than direct investing, REIT investing costs far less on the front end (i.e., requires less up front capital) , they are a more liquid form of investing, and of course there are none of the associated tenant headaches, from collecting rents to making repairs.

i apologize if i picked the wrong forum for this question.  i didn't see anything more specific.

Thanks in advance.

Kevin

[Andrew Johnson]

Kevin Humphreys So a publicly traded REIT is liquid as long the market is open that day. Put the sell order in (market price) and *poof* you have money that’s settled in 24 hours. But you don’t get tax benefits like depreciation, mortgage interest, etc. Now there are some non-public REITs that you hear about on the radio. That doesn’t mean they’re bad but they’re generally going to be for accredited investors (you hear it in the advertising) but their prospectus will tell you their intended hold period. As a passive investor you can’t decide to sell the property. You can sell shares in a publicly traded REIT today. You can sell me your property today (not that you’d get a good price in a compressed timeframe) but you don’t have that individual control with a lot of syndication investments. And if you did have that control, you wouldn’t be a “passive” investor anymore and there are legal/liability implications that go along with that.

That doesn’t mean that any single option is materially better than the other alternatives. Just that there are different vehicles to suit timeframes, liquidity needs, tax benefits, etc.