Buy and Hold RE Investing versus REITs

[Account Closed]

REITs and Buy and Hold RE have similar returns, and in many cases, REITS surpass B&H RE after adjusting for risk. Also, in holding REITs you don't deal with tenants. So, assuming equal leverage and tax implications, what are the benefits of owning physical property vs. REITs? 

Disclosure: I have very little experience in RE investing (1 condo and 1 SFH), so I don't know crap lol.

[Brandon Roof]

I think a lot of it comes down to the ability to add value. Unless you are an activist investor that can throw billions behind something in order to advocate for change, when investing in a REIT, you are largely along for the ride. As you stated, it does have its perks as you don't have the headaches of being a landlord or working with a property manager, and if what you are looking for is truly passive, a REIT may be the way to go.

With a REIT though, outside of a dividend, you're relying solely on capital appreciation. With buy and hold, though it can be passive in nature, allows for so many levers to be pulled by the more active investor to force this appreciation and unlock even more earning potential.

If your main goal is for that purely passive, diversified play, REITs provide a great option, but if you are looking to maximize the return on your invested dollars, though possibly more risky, getting into the mix as a buy and hold investor provides for the opportunity to accomplish so much more.