Why I Stopped Buying Real Estate To Buy REITs Instead

[@askjussi]

Make sure to subscribe to the channel as I will soon discuss some of my favorite REIT investment opportunities. Thank you for all your support and let me know if you have any questions.

[@ivanxyz1]

I had owned rental properties for 20 years. I agree with everything you said. REITs are much better than owning properties. Good video.

[@askjussi]

Thank you for sharing your experience! Do you still own your rentals? Do you plan to sell them?

[@ronpizur2627]

I wish that I could "Like" this video more than once. All of the points that you made are right on. To me, the biggest reason not to own your own rental properties is because it is like having a second job on top of your already full-time job. Who needs that in their life?

[@askjussi]

I agree. Thank you for your support. I appreciate it

[@MrJeffHead]

​@@askjussi if you bought 100k worth of realty income shares in Jan 2020 your equity would be at 67k. If you put a 100k downpayment on a home worth 400k then home would now likely be worth around 550k. You'd have your initial 100k equity plus another 100-200k in equity. How are reits better?

[@BmoreAkuma]

You are excluding any dividends earned that are typically monthly and automatically reinvest for each of those months as long as you own those shares in that REIT. Nice try ​@@MrJeffHead

[@chamixone]

@@MrJeffHeadExactly! It is some work for sure and not for everyone but the gains easily beat reits. There’s something for everybody.

[@MrJeffHead]

@@chamixone I do agree with him if its just rental income vs dividend. But not with capital appreciation factored in.

[@AdamLevine759]

After building a rental property portfolio, I became exhausted with real estate market challenges and decided to sell. Now, with about $5 million, I'm contemplating investing in the stock market with solid positions. What are your thoughts?

[@TomGmaan]

With $5 million, one wrong move can have significant consequences. It's crucial to invest cautiously and diversify, with 40-50% in safe investments. Given your budget, I recommend considering financial advisory services.

[@KeanuReevesf]

Absolutely! Most undervalue advisors, but their expertise and risk mitigation strategies are invaluable for savvy investors. For those with busy schedules, monitoring the market is challenging, so we delegate to experts. I'm currently working with one, and my portfolio has grown to $1.3M, a 25% increase from last year, with robust diversification and inflation hedging.

[@NicoleAniston-o]

This is mind blowing! As a young adult inheriting about $500k and new to stock investing, I'd greatly appreciate it if you could direct me to your advisor. I can't afford to make costly mistakes.

[@KeanuReevesf]

She goes by "Melissa Elise Robinson" I suggest you look her up. To be honest, I almost didn't buy the idea of letting someone handle growing my finance, but so glad I did.

[@NicoleAniston-o]

Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.

[@theTECHYnewb282]

Incredibly well done video. Completely agree on all counts. I've had rental properties and I sold them all off over the years and will not get back into that business. Not worth the headache, your money is tied up and at much more risk. I absolutely love REITS!

[@askjussi]

Thank you for sharing your experience!

[@unpataunpata]

Someone forgot to tell you how to manage your equity

[@theTECHYnewb282]

@@unpataunpata sure buddy 😂

[@Dallas3212]

are you saying rental properties were not beneficial to you? please explain, 'cause it's been my dream to buy a rental property like a low HOA condo for example....

[@theTECHYnewb282]

@@Dallas3212they are a ton of work, can be difficult to liquidate to get your money out. Mixed data on whether real estate investments outperform the S&P 500. In my opinion the best value of real estate investment is the fact you can write off expenses for a loss against your personal income, but that’s only relevant in rare specific circumstances

[@davidwysocki1004]

Good video presentation, Jussi, on rentals vs REITs. And you're spot-on! I would never own rental properties. REITs have been great long-term, liquid investments for me for the past 20 years. Good stuff!

[@askjussi]

Thank you for sharing. I appreciate all your support David.

[@allanwatts8361]

what has been your average dividend yield over those years? please give me insight thanks

[@zenastronomy]

could you list your top ones over the last 20 years?

[@7SideWays]

Rentals done right are powerful, but you make excellent points for REITs. Doing rentals right is not easy. Do both maybe.

[@askjussi]

I agree

[@jgonz69]

Has to be the right REIT. I dumped my last financial planner, because the returns were shit. I only do my own investing now, but managed to find a good financial guy and he turned me on to some really good REIT’s with awesome returns

[@LOSthagod]

Which ones are you looking at?

[@jeffl8549]

Would like a few recommended REITs, if you wouldnt mind

[@nilesandsam]

What is considered an "awesome return" I am just starting to look into REIT but located in Canada. The rental business failed us miserably here. Am trying to understand the market on this, how it works, when it pays out, and the tax implications.

[@gribinvon]

I started to think this when I learned more about REITs not having to deal with any tenants

[@sagig72]

This is such a good video Jussi. Thank you !! I used to rent properties and it was too much headache for me. I'm also not a professional and so used to hire a management company which I was disappointed with. There are many hidden expense. I feel that doing it yourself is a good option for very savvy folks who will also dedicate much time for this. Since I'm not, I prefer REITs. I prefer investing in managements who do this for a living. Also, I get much broader exposure to different markets and different assets which otherwise I won't get. Thanks much for the video Jussi.

[@askjussi]

Thanks a lot for sharing your experience. That's very useful. I feel the same way

[@meyroakabigrem1679]

Fully correct. Worth adding that property investors are also often leveraged way more than REITs are. That can provide upside but also has a lot more risk.

[@askjussi]

Yes it greatly increases risks. There are good reasons why REITs typically keep their LTVs below 50%

[@christophdenner8878]

This is such an excellent channel. Thanks for your work, Jussi!

[@askjussi]

Thank you so much for your kind comment

[@HoanZone]

I saw the title and said "I'm about to learn something" and you didn't disappoint. I have invested in millions of dollars into real estate and never considered reits for all the reasons you covered. Your points for reits are solid!

[@askjussi]

Thank you very much for your kind comment. I appreciate it a lot. Most real estate investors will be heavily biased against REITs and fail to listen to these arguments. It helps to stay objective.

[@Free5tyl3]

Lolz …. hey everybody we have a millionaire watching KZbin videos for financial advice lol Z!!!

[@askjussi]

@@Free5tyl3 Nearly all "millionaires" watch KZbin, including finance related videos

[@johnwalker9429]

Excellent work. Also: In Australia, buying property involves paying a state tax (stamp duty) $42K for a $1M property and selling property involves selling agents fees. REITs do not have these costs and you can sell 10% of your REIT if you need the money, hard to sell 10% of your investment property. The capital gains from selling REIT investments is treated the same as for investment properties.

[@askjussi]

Great point! Thank you for the addition

[@snake10566]

The "time = money" argument is something I always argue with real estate investors. They spend more time than they think on their rentals. And that's the reason I do not buy properties. I want a care free life.

[@askjussi]

Yes and they will somehow assume that their time has no value, which is a big mistake.

[@djayjp]

The risk adjusted returns of REITs are terrible vs buying real estate yourself. REITs have the same volatility of any other stocks. The value is determined by property assessments and that is what banks use. That's what matters. That demonstrates that volatility of private RE valuations is much much lower.

[@wanderingdoc5075]

He's convinced himself, nothing you can say to convince him. now he will need to work another 20-30 years to have a chance as financial freedom where he could have been financially free in his 30s like me had he decided on direct real estate ownership.

[@galomarino7306]

I'm glad someone said it !!! I just looked at "O" fundamentals and price volatility, simply horrible plus historically O has under price inception most of the time, so you'd earn dividends but losing equity and I agree, REIT's are not very real estate exposure products, they tend to follow index more than RE prices.

[@askjussi]

Rental properties are far more volatile than REITs. This is yet another common misconception. Rental properties are concentrated, private, illiquid, capital intensive, highly leveraged investments.

[@mihneaciurea8209]

Very good presentation. I should send this video to my friends

[@askjussi]

Please do. Thank you!

[@TheAhmedvienna]

I agree with this video 90%. Only one thing is that I don’t agree with is that I can never get the same loan for a reit as I did for my property. I use the income from the properties to buy reits and stocks. So all in all it worked out well for me. But I don’t think I’ll buy more. I am happy with the balance I have.

[@askjussi]

You do not need to. This is discussed in the video

[@kenth151]

I have looked thru a lot of comments below, and did not see the one real reason REITs are better. You do not have a renter call you at 1 am telling you the toilet has stopped up. And if you want to get more leverage, borrow money and buy REITs.

[@askjussi]

Maybe listen to the video then. PS: REITs are already leveraged

[@howardjetmundsen41]

Great video! One thing not in the video (but maybe down in the comments below) - the fact that REITs (and other non-REIT real estate investment firms) exist means that you, as an individual investor, often don't have access to the best properties, or you are competing against teams of people who know exactly what they are doing. This makes owning and managing a small individual property all that much harder. It's like a mom-and-pop hardware store trying to compete with Home Depot.

[@askjussi]

Great point! Thank you for the addition

[@TonyMoze]

I had to watch this again and save for reference to show this to people. REITs are a smart move!

[@askjussi]

Thank you for your support. I appreciate it!

[@TonyMoze]

@@askjussi 👍

[@aspreedacore]

Yep I’m convinced I’ll add reits into my future portfolio, VTI+reit xd

[@theodoroseidler7072]

I was extremely fortunate with my rental warehouse. But I realize a lot of it was just luck and good timing. I took care of me during the pandemic in a way the same amount in REITs wouldn't have. But your points are all very valid.

[@askjussi]

A lot of people have made fortuned in REITs as well. Some REITs have even 10x over the past decade.

[@Cal71922]

I like this video, but I disagree with some stuff. 1. If you rent a property out it will appreciate over years. Thats a fact. It doesn't quite behave like a stock. 2. Rental income can pay you higher dividends "Rent" per year. 3. the amount of money you will have to reinvest in your investment depends on what property you have. 4. There is no guarantee of how that Reit will perform on the market. The volatility may drive you crazy. At least with a property you know what's going on and you're receiving a steady income with a guaranteed appreciation. Yes, there is pros and cons but i don't think it's the same. More like comparing apples to oranges. You can actually get better deals and higher dividends or equal with a good stock.

[@askjussi]

1. Same is true for REITs. Over long periods of time, REITs have always recovered from every temporary bear markets and gained value. 2. Lots of REITs yield more than 10% today. 3. Same for REITs. 4. Same for rentals. They are even more volatile than REITs. Investors simply decide to ignore the volatility since they don't receive a daily quote. Thanks!

[@Kashmir1089]

I actually like long videos like this with a lot detail and breakdown

[@codypilkington3324]

I’m investing in O, ViCI, and PLD!

[@askjussi]

Why O? Have you seen my videos on it? Thanks

[@ColenShabalala]

What’s wrong with O

[@askjussi]

@@ColenShabalala see my videos on it

[@Eva1314_XYZ]

I have MAC

[@zacharydaniel1943]

This guy is spitting facts. I have 10 properties that are returning 15% including labor and that is because of extremely fortunate curcumstances and getting deals in a local market I know well. The deals have dried up and I'm just putting my rental money into reits now.

[@joetruth7823]

Don’t forget all the equity you’re earning on those properties……

[@zacharydaniel1943]

@@joetruth7823 that includes the equity im building. Really it's even greater because I'm not adding in appreciation to that which they have

[@askjussi]

@@zacharydaniel1943 Thank you so much for sharing your experience. I appreciate it!

[@MattHall1]

As a neutral observer who owns a few domestic and foreign stock & REIT ETFs, and no rentals: I still believe it’s hard to beat the steady, long-term wealth building practice of owning direct real-estate-but for the lifestyles of at least 80% of Americans-tradable equities do hold much less risk and more advantage.

[@Eva1314_XYZ]

My rentals does go up 100% in 10 years

[@_JohnJohn_]

I diversified within real estate....rentals, REITS, and hard money lending.

[@seankeeling9819]

Am I missing something on the comments? In my area the average home is $300k, average rent is $1500 and the average mortgage is $1900. So even with a %20 down payment I would lose $400 a month for 30 years. If I put %20 of the average house purchase in an reit ($60k) I could expect to earn 6k a year on average indefinitely. I’m not seeing how what he’s saying is so controversial but please help me understand if this maths isn’t good

[@gardonsmith1095]

You're only thinking about cash flow. You gain a property that's worth money, increasing your net worth as you pay it down. Particularly with rentals, the math changes a lot because they'll be paying a big portion of it for you.

[@nilesandsam]

It's more about the value of that average home going up while the mortgage gets paid down partially by someone else. Now depending where you are depends on the tax implications of the future sale of that property will determine your return. A lot of people don't do the math properly though as they forget to factor the income tax on any profit from the property rental income (you could be at a loss but in terms of the government still be in a gain so there is that crap) then any tax on sale of rental property. I've seen many say oh I had this $300,000 for 7 years a rental I sold for $500,000 but they don't ever factor the fees and taxes that made that profit minimal. Otherwise it's borrowing against the increase value to buy more property to try to obtain more income. But all you need is one bad tenant to refuse to pay rent and you have a huge headache on your hands possibly for years depending where you live and tenant laws

[@nickbailey9622]

Money in reit gains from day 1 in real cash. With freedom Money in mortgage does gain but real returns are years away. With no freedom.

[@chamixone]

Coming from a property investor there are some misconceptions you have. Management costs for both Reits and private rentals are relative. While it seems we spend a lot more on management, we also see a lot more in cash flow. Reits don’t manage themselves do they? It’s actually more expensive because there are two layers of costs. 1, the regular managements costs as a private property, which you don’t see but it is there and it’s not free. And 2, the costs of the fund itself! That’s part of the reason why dividends earning are not as high. Btw, as of right now the 5 year average for Realty Income is -24% ouch! Btw, Warren Buffet did not become a billionaire by investing on Reits! If so there would be a lot of billionaires out there too!

[@anilshah1029]

Exactly- he is using misleading numbers in terms of management fees.

[@sheeiiittt2012]

@@anilshah1029 My friend is a building engineer for a building owned by a REIT, the amount they spend on pointless things is crazy. To change a light switch it would cost me $2, for them it would cost at least $300. They gave him 60 hours of overtime 60*60, $3,600 to paint a small office space. My amigos would have done it for $300. He gets paid thousands of dollars just to do a "freeze watch" when it's cold outside and on and on with the pointless waste

[@mr.seanster]

Reit is more like investing in equity, stock and mutual funds. Investing in real estate gives you more flexibility and like owning a business. It is definitely more work but can be more profitable and give you more control. If you don't like to do the work then it is not for you. Saying one is better than the other is ignorant. There is something for every. Pick one that fits your preference and need.

[@askjussi]

REITs own nothing else than real estate. When you are buying REITs, you are buying real estate. The stock market is volatile in the near term, but the long term performance is a function of the real estate.

[@wanderingdoc5075]

​@@askjussiYou are so far removed from the tax benefits, cash flow, market inefficiencies etc. by buying a paper asset REIT, that by the time you receive your dividend you have nothing to do with investing with real estate. The best things about real estate have already been picked clean by the time it gets to you. Sorry you've had a bad experience with real estate. My portfolio takes less time to manage than the time people spend fiddling in their brokerage account.

[@neocollective5959]

@@wanderingdoc5075 Very true. Expecting to be a completely passive investor and earn as much as an active/hands-on real estate investor does is rather naive. Just like when you choose to hire a property management company to run your rentals, you sacrifice earnings for comfort.

[@askjussi]

@@wanderingdoc5075 Not at all, I pay less taxes investing in REITs than in rental properties and enjoy the benefits of buying stakes at large discounts because the market is very inefficient. I have not had bad experiences with real estate. I invest in both. I am simply saying that REITs are better investments in the vast majority of cases, and this is especially true today

[@nexustech1071]

Even in country like Msia where blue colour labour is affordable, the cost of managing rental properties is still not feasible. Better stick to Reits and gain total return of 6 to 10% per year.

[@munagalavrr]

0.3% cost on REIT comparing to 10% rental .. is comparing apples & oranges. 10% rental could be between 0.1% to 0.5% on the property cost.

[@askjussi]

It is not. It is far more than that.

[@Ozymondias99]

REIT's are good way to invest in Real Estate without having to deal with Tenants and contractors when something breaks.

[@shill1103]

I Agree with what most of what he’s saying but reit returns are way lower than real estate. Most of the funds he’s recommending pay a 4% dividend. You’re not going to build a real estate empire with those returns. If you have millions already I guess a reit will work but if your starting from scratch you need to go with real estate and get your hands dirty. You could get better returns by just puttting your money in the bank than most of the reits he’s recommending

[@askjussi]

The yield is so low because REITs retain a lot of their cash flow to reinvest in growth. Therefore, the dividend yield may be 4%, but the real cash flow yield is 8% or more. Many trade at 10%+ cash flow yields. They retain the cash flow to grow, resulting in a rising share price. This is also more tax efficient for investors since all the cash retained is tax deferred

[@normanjohnson2548]

REITs don’t give you the tax benefits or depreciation, nor can you Wright off debt, property tax, repairs, maintenance, and management fees, nor do you get the appreciation of the property.

[@askjussi]

You may even less taxes when investing in REITs. I have a video on this topic. Type REIT taxes jussi askola on youtube

[@bluecollarbullionballer4269]

I love being a lazy landlord just buying REITS.

[@mrrondouglas]

The leverage argument is nonsense because you're only getting a return on your direct capital. You're not benefiting from leveraging the bank's money. If I put $100k into a $500k property and it goes up 5%, that's a 25% nominal return $25k/$100k. With the REIT, I would just get the 5%.

[@askjussi]

No, that is not correct. You did not understand the section on REIT leverage. The benefits are exactly the same. What's traded in the market is the equity value, not the total asset value

[@mrrondouglas]

@@askjussi If you put $100k into a REIT, you have a $100k investment. If you put $100k into a property, you have a $400k or $500k investment that you benefit from the appreciation of. The benefits are not the same. "The FTSE Nareit All REITs index, which tracks the performance of all publicly traded REITs in the U.S., had an average annual total return (dividends included) of 3.58% during the five-year period that ended in August 2023. For the 10-year period between 2013 and 2022, the index averaged 7.48% per year."

[@askjussi]

@@mrrondouglas No that is not correct. Your $100 investment in a REIT is your downpayment. The REIT then uses leverage on top of that. So your $100 investment could control 400 - 500. It is the exact same thing. What's traded on the stock market is the equity value, not the total asset value

[@beehappycoleman7159]

In my humble opinion, it’s probably good to add in your credibility to highlight a little bit of the good things about rental properties so that you Won’t appear from your audience, as if you’re just out for yourself In singing the crazes of real estate investment trust. I love your video and I get it. I’ve owned and manage rental properties for 40 years since the age of 20. So you do the math on How old I am. I’m on top of my game and I raise the rents slightly below market without gouging. I’m small property operator with personal relationships with my tenants. They stay long-term. The secrets in the sauce and where I buy and how I take care of the properties. For example, I just put in $25,000 in improvements to a rental property and I upped the rent $600 per month. I’m strategic and I plan. But I agree with you that they can become time-consuming. So I am beginning to look at real estate investment trust as an exit strategy at least partially to get out of some of my rental properties. The only thing that makes me a little suspect Is that I am careful on which video and book information. I choose because I don’t want to be sold on something. I want the education, which it seems like you are giving. Good job. Though, I like to see both sides of The situation, and NOT only the downside of owning rental property. There are definitely some upsides if done right. Please excuse the typos or any typos taken out of context as I’m quickly voice texting this in and i’ve got to get going.

[@aaronbatiste5385]

A balanced portfolio of both is the answer. This video is informative, but not sound financial advice.

[@askjussi]

I agree that both can make sense. I own some private real estate as well. My point is simply that in most cases, REITs are better investments, and this is especially true today

[@mikell.6064]

The thing is that you can get a loan to buy a house (as of 3 years ago at 3% rate) whereas you can’t get a decent loan to buy reits. Getting 350k in equity from a sale is not the same as 10 % return on a reit. That’s why you have more millionaires from real estate than reits. You might not see billionaires as much because scaling it to that level is hard.

[@askjussi]

Listen to the video. REITs take leverage. It is the exact same thing

[@mikell.6064]

@@askjussi 40 k can get you a down payment on 200k house.. 40k in Reits can’t get you 5x leverage

[@askjussi]

@@mikell.6064 REITs use leverage in the same way. What's traded is the downpayment, not the total asset value

[@b0ndrey]

They don’t use leverage in the same way. It’s not the same. If you have 100k down and put into REIT, you’re earning a percentage on 100k. Use that 100k down on a 500k property and now have a 500k asset that is being paid on your behalf plus a small percentage profit, tax advantages, and is in the grand scheme of things appreciating a few percent a year. That few percent a year on 500k is a lot more than REIT returns on 100k. And if you factor the annual mortgage pay down on your behalf and rent gains and tax advantages on top of appreciation, there’s no comparison when comparing the bottom line gains. Everything else in the video was spot on though, it’s a lot of work and a lot of risk especially in today’s inflated environment.

[@mikell.6064]

@@b0ndrey Exactly !!

[@tylerbailey3978]

Physical real estate is the #1 asset class. It gives the ultimate protection against hyperinflation. Under hyperinflation, the property value will increase drastically and so will the leases. Eventually, there will be a new currency adopted and the physical real estate can then be sold or rented in exchange for the new currency. Paper assets are great until there is hyperinflation or a new currency.

[@askjussi]

REITs own nothing else than real estate. They enjoy the exact same benefits of real estate and more.

[@tylerbailey3978]

@@askjussi If hyperinflation occurs, your currency will be trapped in the REIT unless you sell. So either you sell your REIT in exchange for a dead currency, or you keep your currency inside the REIT and lose all your money. The REIT company will not refund you your money nor will a brokerage or the government. Everyone will start over. Except those who own physical real estate. This scenario actually has already happened in many countries. Dont think it cannot happen.

[@Muddi12345]

@@tylerbailey3978which countries?

[@askjussi]

@@tylerbailey3978 REITs are backed by real estate and rents would only go up. You earn this via rising dividends.

[@avrukin]

A reit is just a pooled real estate portfolio. In hyperinflation it’ll behave exactly the same way as real estate you own directly. Think of yourself as being in a partnership with a million other partners vs. owning yourself or in a small 5-10 person partnership.

[@sheeiiittt2012]

Month-end 3-Month total YTD 1-yr 3-yr 5-yr 10-yr Since inception 09/23/2004 VNQ (Market price) 1.91% -1.22% -1.22% 8.51% 1.71% 3.67% 6.20% 7.48% I'll stick with my rentals, maybe REITs when I'm ready to retire and accept a lower return. When you account for leveraged returns, and tax efficiency I'm in a different stratosphere. I don't know of any side hustles personally that return more than self management so it works for me perfectly. I do agree about today though, high interest rates = expensive rentals and REITs are looking cheap. Just thankful to have over $1m in debt at under 3.5% fixed for 30 years 😎

[@askjussi]

VNQ is not even a REIT ETF. It is a real estate ETF with lots of things like homebuilders, brokers, etc.

[@andremikhailobierezrfccwms6724]

Happy to have stumbled into this channel.

[@askjussi]

Thank you for your support. I appreciate it!

[@torgnyandersson403]

If anything, REITs can be *more* leveraged, because you can buy using margin

[@bgt54rfvcde32wsxzaq1]

My REITS Are In My HSA And ROTH So No Taxes.

[@guerlinenicolas8159]

This is why I brought the REIT stocks. To much headache with rental property

[@LiquidHydroxide]

Did you buy 200k in reits with 50k down?

[@ajones957]

Seem to remember someone by this name recommending a REIT with the ticker "MPW"...

[@mgtazco]

You are doing a lot of assumptions but I give you 6 from 10. Good enough.

[@askjussi]

It is a must to make assumptions. What would you have done differently?

[@jeffl8549]

I subscribed. I was just thinking about REIT investing. The AI algorithms got me to this channel 😂

[@askjussi]

Thank you for your support!

[@donguadalucio1405]

It seems like google reads your mind.

[@JohnyTechReview]

Can’t pay me enough to own rental. Money isn’t worth the headache and mental

[@askjussi]

I agree

[@tubenachos]

REITs is true passive income

[@zhongzhong1994]

The only subtle difference is REITs cant use 250k/500k tax credit, if you lived 2 years before renting

[@theodoroseidler7072]

The only thing that pisses me off is paying 30% on my dividends.

[@askjussi]

I pay far less than that. See REIT and taxes Jussi Askola

[@starrhazel92]

I want to open my daughters (9,7) a custodial brokerage acct and focus on reiTs has anyone done this before

[@PedroOjeda]

0.3% AUM fee is equivalent to 3% fee in revenue (give or take).

[@petrov99999]

Take O which is listed as one of the best reits by us news. It went from $16 in 2002 to $53 now. 3.3x appreciation with 5.5% dividend. Over 20 years those 5.5% reinvested (less taxes) might add 200% , making around 5x appreciation. Take a house in Seattle area which was bought at $260k in 2002 and worth $1.1 mil today. Total appreciation is 4.2x. However the house was bought with 25% down (the is the worst case scenario since you could buy it with 5% down those days). Thus effective appreciation is 4x4.2 ~16.8 times. The house was always cash flow positive with a modest cash flow after mortgage and other expenses, let’s discard that income and along with a depreciation write off which is around extra $70k over 20 years. Thus a house in the right area is much better investment than even the best reit by the widest margin. Reits still might be better than buying a massive multi unit complex and hiring management company which might be less efficient than reit, however investment into single family house duplex triplex will be almost always superior to any reit. But it is more work as well.

[@philjohnson2456]

Realty Income ( O ) was not $16 in 2022. what made you think this? It bounced around from $55 to $72. It hasn't been $16 since 2008....I'm also extremely skeptical, more-so highly doubtful, that a home in seattle wnet from 260K to $1.1mil without a huge remodel (thus not a 4.2x return)

[@petrov99999]

Sorry made a typo. I meant 2002

[@petrov99999]

@@philjohnson2456 over 22 years, house was painted inside out ($9k), roof was replaced $8k, carpet was replaced ($3.5k) on top of that there was regular wear and tear repair done which would add $3k/year on average. The house has a positive cash flow after mortgage and taxes around $6k/year which takes care of all maintenance costs.

[@askjussi]

First of all, O is one of the worst net lease REITs to buy today in my opinion. See my videos. But O has done exceptionally for investors over the long run, far better than 99% of rental investors. It has earned 15% average annual total returns since going public in 1994.

[@bhupesh0111]

If I wish to buy $300,000 of any REIT and I come with a down payment of $75,000..Will they give me leverage of $275,000?? BS!

[@LiquidHydroxide]

Exactly. I came to see if this would be addressed in this video and it wasn’t.

[@bhupesh0111]

@@LiquidHydroxide RE is the best investment ever you get 75% leverage with ton of tax breaks and depreciation

[@askjussi]

No. Listen to the video again. You did not get it

[@vaughnmcguire5214]

really really really great content. Thank you!

[@boomn216]

I would use the rental income to buy the Reit's.

[@chrisc9389]

this is exactly what I do

[@askjussi]

Not a bad approach

[@makesumwake]

The REIT stock doesnt keep up with realestate appreciation. So you count realestate appreciation that you dont get with REITs, you lose big with REITs.

[@bauchwegmaenner]

Let's clarify something about buying rental properties. The only individuals who truly benefit from a rental property in the long run are your children, particularly once the property is fully paid off. In the years leading up to that point, as you pay off the mortgage over 20-30 years, the profit relative to the effort put into managing the property may seem relatively small.

[@askjussi]

Yes and those profits would be greater if you focused on your career instead and invested in REITs.

[@bareqn8626]

If you bought a house for $600k and rent it for $3k a month rent, you'll make 32k at the end of the year If you buy $600k in a REIT like Oreality that pays 5.8% dividend that's $36k a year in dividend, minus managing the property

[@askjussi]

No that is not how it works. REITs retain a significant portion of the cash flow to reinvest in growth. The dividend is just a small portion of the total return. The payout ratios are generally about 70%, so the REIT's cash flow yield would be closer to 9% in this case.

[@LiquidHydroxide]

Math crime. You have to pay 600 k to get 600k in reits. You would only have to put in 150k to get 600k in real estate (or less).

[@LiquidHydroxide]

You would also be targeting 6k a month in for rental properties that are worth 600k.

[@LiquidHydroxide]

Your statement is all around trash

[@askjussi]

@@LiquidHydroxide No. What's traded in the market is the equity value. The equivalent of your 150k in your example. the 600k would control far more real estate

[@victormutta1115]

Thank you for this video. I’ve been debating to myself whether it’s worth tying up so much cash into real estate. This video has at least helped kick that can down the road for a week or two. 😅😂

[@askjussi]

Thanks for your interest. Let me know if you have any questions!

[@fuzoltan]

great summary and comparison, thanks for that!

[@richardbrown6591]

New sub here can't wait to watch your other content your speaking my language.

[@askjussi]

Thank you for your support!

[@dandydan999]

What about REIT ETFs? Pls explain the poor performance of VNQ

[@askjussi]

VNQ is not a REIT ETF. It is a real estate ETF that includes a lot of homebuilders, brokers, etc. It is also a market-cap weighted ETF so it invests mostly in mega cap REITs, which are a minority of the REIT sector. Finally, we are in a bear market right now

[@Corvinus99]

If you're so hung up on managing your rental properties, you are not doing it right. You don't need to live near your properties either. I could live anywhere I want and still manage my properties. And to hell with working for somebody else. Maybe I should start my own reit. And by the way , I also have a reit portfolio along with other stocks.

[@askjussi]

Right, but the management of rentals is expensive if you use a manager and there are significant conflicts of interest.

[@RB-je3yj]

Can I access the equity on a REIT?! I'm currently getting $75k every 2 years, from 3 rental properties!

[@askjussi]

The equity is what's traded in the market. You can sell and access your equity or parts of it at any time

[@xplade9159]

Bro, no matter how good u said about reit, those reits find also the structure formed from thousands of rental properties like example black water investment... Those billionaire shareholders or boss at the reits company are rely on the income from rental properties to pay the dividends of their reits also. From the perspective of small investors or hew investors like us, rental properties is something we can leverage most out of our money like structuring a low down payment or zero down payment rental properties purchases.. REIT U NEED TO BUY WITH YR OWN CASH AND MARGIN USUALLY IS 2 TO 3 TIMES MAX FOR NORMAL INVESTORS LIKE US.... U CAN SEE CLEARLY WHICH SPV GIVE YOU THE MOST BEST BUCKS OUT OF YR INVESTMENT

[@askjussi]

You misunderstood. What you see traded is the equity, the equivalent of your down payment. Not the total asset value. If you invest $1,000 in REITs, that's $1,000 down payment. REITs then add leverage to that. It is no different

[@BmoreAkuma]

It just sounds like you are just a cheap ass and not willing to risk anything

[@jieunlove67]

Can you recommend a REITs app or website for a beginner investments?

[@askjussi]

See the first link in the description :)

[@kellihuang27]

Reits is great if you have money and no time. Real estate can work with no money down 4-plex that cashflows day one (VA loan, USDA loans). Learn about all strategies and find out what works for your lifestyle

[@askjussi]

The days of no money down are over in 99% of cases and it is very risky and work intensive. No different than taking another job

[@theluckyman74]

Obviously you can mony on reits but vanilla ice made big money on buying properties. I am not sure if he invested in reits how much it would be worth. It reminds me of buying a bitcoin Etf versus actually buying bitcoin. They bought both of pro and cons. I wish I bought actually bitcoin . I bought Ether Etfs and bitcoin

[@medwayhistory3101]

What is the most tax efficient and low mer reit to hold in a Canadian non-reg account? I’m looking for some suggestions. Thanks

[@LiquidHydroxide]

Owning rental properties is a second job that allows you to get out of your day job much quicker than reits will. If you don’t like managing properties that fine. Just don’t say that reits are better than owning rental properties it’s not true.

[@askjussi]

I do not agree. They will slow down your ability to get that next promotion and pay hike.

[@munagalavrr]

what is "CFA". Who is even capable to certify, :)

[@joetruth7823]

He didn’t fully address the benefit of using the tax break from rental property depreciation to cover taxes on other passive income streams. Besides the tax break and income from your rental it’s also an appreciating asset- in a good market. We only have a rental house because my wife and I had our own houses when we met. We moved in together and rent out the other one- it was a no brainer.

[@askjussi]

I have a separate video on this. See "REITs and taxes Jussi Askola". REITs enjoy similar tax advantages so there is little added value in comparing this.

[@djayjp]

7:20 lol this chart is absolute fiction.

[@askjussi]

Then tell me why. It includes the returns of 100+ private real estate funds.

[@moahhamid]

Hey that was top quality information. Could you make a video on Ben Grahams video on REIT vs physical real estate comparison?

[@askjussi]

Sure! Lots of misconceptions in that video

[@moahhamid]

@@askjussi thanks Jussi! Looking forward to the reaction video

[@moahhamid]

@@askjussi sorry, I meant Graham Stephen lol

[@askjussi]

@@moahhamid Yes I understood that haha

[@MegaBoolaBoola]

A typical REIT has only about 1:1 leverage. Typical private real estate has 5:1 leverage. So your returns are magnified much more. Also, you can get 30-year fixed rate loans on private real estate. With a REIT, they often have to refinance every 7 years. In a rising rate environment like the one we are in, that sucks for REITS, constantly having to refinance at higher interest rates.

[@askjussi]

There are REITs that use far more leverage but they are good reasons why they typically don't use as much. It is extremely risky and unlike private investors, REITs have access to lots of other different forms of capital to optimize their balance sheets and mitigate risks. Private landlords are limited to mortgages. REITs use mortgages, bonds, preferred equity, convertibles, equity, LP money, etc.

[@MegaBoolaBoola]

@@askjussi You are either willfully blind, or talking your book. At issuance, those forms of financimg will have inferior terms to the market rate of a simple 30-year fixed mortgage.

[@askjussi]

@@MegaBoolaBoola Many REITs have issued 30 year fixed rate debt.

[@MegaBoolaBoola]

@@askjussi Not at 95% LTV

[@matthewkelly4107]

You didn't break out the diff on management fees on aum vs rev. The results might be the same or better however the fees you quoted aren't directly comparable.

[@askjussi]

It is much lower for REITs because of their large scale. I can do a more detailed follow up on this

[@ArnyTrezzi]

Great perspective!

[@martinithechobit]

Ty for the break down.

[@zoranmilevski7419]

MPW SLG OUT my top portfolio holdings

[@timperry8428]

I'd go back and watch every single video if you had time stamps. Your value is high enough it will benefit you more than hurt you

[@anilshah1029]

The biggest issue I have on this video is comparing REIT management fee as a percentage of asset and individual as a percentage of income. Completely differently figures and purely misleading. REIT can leverage but probably not 5X that we do on individual properties. That makes a difference. Management cost should be compared apples to apples - percentage of revenue. Taxes should be similar. I give you that REITs has economic of scales. Also info about cheaper debt is completely misleading- first, commercial real estate debt are short term. So most of them are being refinanced. If they own residential properties on 30 year cheap debt, it will be already priced in as their income will be larger.

[@askjussi]

I can do a follow up on this. It is far lower in the case of REITs due to their scale

[@anilshah1029]

@@askjussi sure, would be happy to see some real numbers on real estate returns vs REITS

[@askjussi]

@@anilshah1029 There were a few studies in the videos. 3 of them if I remember right

[@Zaycream21]

When i found ORC a couple years back, i did the math and thought why isnt everyone doing this instead of physical real estate? Then the company went down lol then the dividend went way down...smh but im still learning

[@askjussi]

ORC is not a landlord. It is a mortgage lender.

[@Zaycream21]

@@askjussi very true and I stand corrected. I will be looking out for your picks

[@askjussi]

@@Zaycream21 thanks for your interest!

[@cryptobug7531]

is it pershent or percent?

[@santiagonegroni9032]

What if someone is already heavily invested in real estate? If I sell now, and yes I want to, what are the returns like if I don’t qualify for any tax advantageous accounts?? Would REITs still beat the S&P without avoiding taxes from dividends?

[@askjussi]

Tough one. It depends on personal circumstances. The tax benefits of real estate greatly reduce your flexibility and with that, increase your risk and lower your returns. That's an indirect tax that's often overlooked

[@recycle_your_money]

I have neither time nor interest in screening and analyzing, so I just bought 100 shares of IYR ETF and sell covered calls on it

[@askjussi]

There are better options in my opinion

[@tomas.stesti]

Man, the VIDEO IS OFF! 😀 Please adjust the focus next time 🙂

[@askjussi]

Yes sorry about that!

[@jasonbroom7147]

No way I'm getting into a REIT, right now...possibly the worst time in history, with commercial real estate impacted severely by the work-from-home changes, and residential reality being horribly over-bought, right now. The only kind of REIT I would even consider, at the moment, is raw land, especially agricultural land...cuz people gotta eat and there is no more farm land being made, these days.

[@askjussi]

Offices represent just 3% of the REIT sector. Residential REITs are priced at a 40% discount to the fair value of their assets. You need to understand these two things before you judge the REIT sector and the opportunities that it presents

[@JojoLannister]

I don’t know why you recommending BSR reit. It lost it values -50% since 2022. Duhh.. just stick to bigger names O, ViCi. Unless u get paid by BSR.

[@askjussi]

That is precisely why. It is very cheap after its crash. It trades at a large discount relative to the value of its assets. And no, I am not paid by them or any other REIT

[@carlosgrimaldi4318]

I would argue against the idea that multifamily REITs would be successful as the multifamily construction market has cool substantially.

[@askjussi]

less construction is a positive. Less supply growth

[@carlosgrimaldi4318]

@askjussi not exactly true. There's plenty of free land and incentives for affordable housing. Supply is growing but but it's affordable housing funded by government incentives and tax credits. Technically, looking at ABI reports, multifamily has been in a recession for several quarters. Market will drop much, much more.

[@whiteranger79]

Are we talking about reit in etf or app like fundrise or concreit? Do it matter

[@askjussi]

Public REITs. I would avoid platforms like Fundrise

[@minifunkable]

You gotta put down 50% to break even on a rental property where I live.

[@BigRed2]

Sold all my OXY warrants (18k)a few weeks ago and then spent $500k on Realty Income “O” just over 9600 shares, i’m 40 and think this will be good in 15 years, looking to dump $200k in either AT&T or Verizon but can’t decide 😢

[@askjussi]

Why not a REIT instead

[@slabbygabby]

Don't put your money in those two stocks. Your looking for income so look at a covered call etf instead

[@Ali-xz4kq]

Thanks!

[@askjussi]

Thank you for your support and let me know if I can help with anything

[@scrantoj]

In general I totally agree and have in fact been selling private real estate over the past two years to buy REITs instead. I do think that there are some segments where private investors can have an edge. I feel that for properties worth less than $5mm or so, the small size means that it isn't worth the time and attention of the REIT. I do feel that from time to time you can find good deals in the price range that might be a bit too big for many private investors but too small for institutional investors. In the current market I feel REITs offer more value but I think this could be cyclical.

[@askjussi]

Thanks for sharing your thoughts

[@andychang7137]

REIT could be a good reason why real estate isn’t available for regular ppl Also with everything is on the high side, there isn’t so much room for reit to grow Instead , they are coming down We will see how this monopoly game ends

[@askjussi]

REITs are the cheapest in a decade in case you missed it.

[@reitsforlife]

Did you see aldag ( ceo of mpw ) bought back almost 900,000 shares this month? Why haven't the declared the dividend yet? Makes me nervous as hell.

[@askjussi]

I hope that they fully suspend the dividend

[@hansschotterradler3772]

@@askjussi Why? To buy back shares? Or to pay down debt? Both?

[@reitsforlife]

I thought they cant suspend a dividend because they are a reit? @@askjussi

[@chrisc9389]

didn't he get stock options at no cost? Or did he pay open market price for the shares?

[@askjussi]

@@reitsforlife There are still ways to suspend a dividend when needede