Newbie considering real estate investment

[Mike J.]

Greetings. Mike here from... actually it doesn't matter because when I finish grad school eventually, I'll be somewhere far away, but I don't know where now.

I am considering learning about real estate investment, but I'm not sure it's right for me. The first decision would be buying vs. renting wherever I end up, with the idea of potentially turning the property into a rental after moving out eventually. I'd appreciate any perspective here or perhaps a suggestion about which subforum is most appropriate for more general and theoretical inquiries.

Background:

I have zero interest in day-to-day property management, zero interest in fixing properties, little interest in finding good values on the market, and little interest in spending much time on this after doing the research. Presumably unlike many others here, I don't have a preference for physical securities and a hands-on approach. I am a buy-and-hold investor who prefers (and currently owns) stock and bond index funds to gain controlled market exposure, so my interest is really just in risk hedging and diversification—or potentially higher profits.

My aim is to divert much of my income to investments that will help me achieve financial independence at a relatively early age, retaining a realistic perspective about cyclical market conditions, loss, risk, and expected returns.

Thanks.

[Gregory H.]

Mike, real estate, like anything else, can be a miserable investment unless you are passionate about it. Since you don't really seem to want a hands-on investment, I would stick to the stocks & bonds. 

If you want some real estate exposure, maybe start looking at putting some of your investable assets into REITs. Some stable REITs for new investors would be ticker symbols like HCP, O, DLR, HCN, NNN, WPC. Alternatively, you could pick up a REIT index fund. The REIT market is somewhat hot right now, so maybe wait for a 10-20% correction before jumping in. Avoid mREITs until you are comfortable with regular REITs.

Also, I would definitely hold REITs in a retirement account if you can, not a brokerage account, since the dividends are taxed as ordinary income.

Hope this helps!