Does a REIT Make Sense?

Question

Is passive investing in a REIT a good idea? What are the returns, appreciation, risk and tax implications compared to being a landlord? Is Brandon Turner's Mobile Home REIT a good investment? As an older investor, I'm looking to be less engaged in managing properties--I have management companies doing that, but let's face it, you are still involved and have to pay attention to what's going on. Asking for a friend....

Kevin Vandenboss · Answer

I think REITs make sense for a lot of RE investors. Mainly because it's an asset class you already understand. I don't like investing in stocks because I don't know enough about the companies and how their business works. I like REITs because I know real estate and I can make more informed investment decisions.

In regard to returns, my REIT portfolio averages just over a 6% dividend yield and about 10% annual growth in price.

As far as taxes, REITs aren't taxed at the corporate level. Investors pay ordinary income taxes on the dividends.

I'm in a couple of private REITs, but prefer publicly traded REITs overall. They own some of the greatest real estate assets in existence, get the best lending terms available, and have the most capable management teams. I also like the transparency and the fact that I cash out any amount of my portfolio anytime I want, or invest any amount I want.

Bob Adams · Answer

Thank you Kevin, this is very helpful. Another quick question: how are the managers of the REIT paid? I am currently looking at several private REIT's including Brandon Turner's Open Door Capital, but I haven't been able to get them to respond to my inquiries.

Lane Kawaoka · Answer

REITs is a retail investment that happen to invest in real estate. The big thing that folks lose site of is to get away from retail. Go more direct with operator and cut out the middle man (crowdfunding website, turnkey marketer).