Investing in Real Estate Through REITs

The first 1000 people who click the link will get 2 free months of Skillshare Premium: skl.sh/theplai...
Link to Canadian REIT tax information: dividendearner...
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Intro/Outro Music: www.bensound.c...
Real estate is a popular investment, but it's not very accessible one for beginners. Luckily, REITs make it very easy to gain exposure to real properties; we explain the security and more in this video.
This video was sponsored by Skillshare
DISCLAIMER:
This channel is for education purposes only and is not affiliated with any financial institution, although Richard does work as an employee for an investment manager. Richard Coffin is not registered to provide investment advice and as such does not provide recommendations on The Plain Bagel - those looking for investment advice should seek out a registered professional. Richard is not responsible for investment actions taken by viewers.

[@ThePlainBagel]

Happy Friday everyone! The first 1000 people who click the link will get 2 free months of Skillshare Premium: skl.sh/theplainbagel8

[@slithos14]

Honestly would be pretty cool to see a colab with Graham lol

[@UmTheMuse]

@@slithos14 I agree. Graham himself is pretty cool, but he tends to attract some pretty sleazy people for his collab videos (except MeetKevin, I have a low opinion of his other guests). Would be nice to see these two together, especially if they (politely) disagree.

[@gabrielrodriguez9835]

Damn I was really hoping to get 12 minutes and 56 seconds of that fire ass intro style

[@CocolinoFan]

I love your intors 😂. You always manage to make me crack a smile.

[@neila.9195]

the Graham Stephen outro is even better

[@jonathanpryzby4029]

1 word: realestate!

[@davidsdinero]

What I love about REITs is that they're accesible to anyone, they're inexpensive and also don't have the stress of picking and managing a property to invest in!💯

[@fififinance7469]

Yes - agree, access is the big sell and while i was researching discovered that sophisticated investors tend to stay away because property is not easy to get into and manage, and you cannot sell a house at the touch of the button. Hence the actual returns are lower than owning the asset outright, and it does become more speculative than it need be. Maybe I am wrong, but I just feel like a total index tracker is a safer bet.. or buying a basket of housebuilders for liquid property exposure.

[@ablet85]

@@fififinance7469 depends on where you live and rental returns. Where I am 1m in REITs gives dividends far exceeding the rental return on a property worth the same. In fact 1m @ 7.5% dividends is enough to repay 3-4 $1m properties plus the rent they would return and any growth.

[@OopsFailedArt]

@@fififinance7469 it can largely depend on the REIT. Many are extremely diversified already while others are specific to one region or income class (residential). It’s definitely a case of knowing what you’re buying

[@Magic_beans_]

As our host mentions at 4:40, I also like the variety in the type of property I can own. I’m not interested in being a residential landlord, but through REITs I can own medical offices or bowling alleys.

[@AxelQC]

If you buy REITs or REIT mutual funds in a ROTH IRA, you can collect the dividends and never pay taxes on them. You already paid taxes on the money you used to buy the shares, so the dividends and earnings are tax free.

[@sor3999]

I knew he was making fun of Graham Stephan and then he confirms my suspicion by the end. :P I went through a lot of different "financial gurus" who seemingly are obsessed with real estate get rich quick schemes and their advise increasingly useless. Like not all of us have a millions lying around to buy enough properties to retire off of. But now I'm here.

[@jackofthecoke]

It's like dividend investing. It's not for people with low account balances. Grand majority including yours truly are best off maxing out our Roths, maybe playing with a few individual picks with strong fundamentals, and investing in new job skills.

[@Josue.Pronounced.Hose_Way]

1) Great intro. I love it when you let loose a little bit. April Fool's episode is still one of my all time greatest youtube videos. Do more please? 2) I'm going to seriously put more thought into REITs thanks to your breakdown. The tax breakdown was really thoughtful and well explained. 3) I subscribed to Graham for like a month but after a while I found him exceptionally annoying. Far greater quality of work coming from the plain bagel. Slow and steady, I'd bet that he'll fizzle out within a few years while you guys continue a healthy upward tread. More subscribers within 5 years, I'm calling it.

[@dxkaiyuan4177]

Graham has been alright for me so far, but the part of his videos which are absolutely annoying is where he tells us to "smash the like button", and putting so much unnecessary emphasis on it. We all know how the KZbin algorithm works, I'll press like when i damn well feel like it!

[@Josue.Pronounced.Hose_Way]

@@dxkaiyuan4177 I find him really self-interested and I'm sure he thinks 'All people are selfish and self interested so it's ok if I'm super self-interested' and I'm like... nah man, you're obnoxious.

[@punisher5598]

@@dxkaiyuan4177 I’ve read that there is a statistically significant change in like volume when the creator asks for likes.

[@elmateo77]

So if you can hold REITs in a tax-exempt account there's a potential for large profits.

[@MarincaGheorghe]

Not if the stock value depreciates.

[@firelordsozin3677]

Own a reit etf ...VNQ

[@moahmadi22]

A stock & cash ISA in the UK or a LISA would be great. I wonder if anyone is actually doing this?

[@chapandonaweb6142]

Here in Brazil real estate is the boomers' favourite investment. Guys think a stock portfolio with the biggest companies in the country are too risky, but an renting apartment rented to an informal worker is the safest investment possible.

[@aashishthite1163]

Underrated channel. Hope Graham watches this video :)

[@jasonawakelin2926]

Congrats on buying your first house! Thanks for this video, it was great.

[@RandyLy]

I always thought of you as the youtube real estate guy for Canada, just like how Graham is the youtube real estate guy for California. Anyway, great video! Thank you for clearing up the difference in dividend payments for REITs from stocks

[@ThePlainBagel]

I'm humbled! However I am far from a real estate expert; I only know about it because of my work with other investments.

[@KurikuShoTto]

I love watching both yours and Ben Felix's videos. Even when you both cover the same topics, I enjoy watching both because you guys explain concepts in different ways and I feel like I really understand something like REITs after hearing both of you outline it

[@TheRealE.B.]

Don't put a heavy marble countertop island in your kitchen if the floor beams are wood and the floor is tile. The floor will creep (sag over time) and the tile will crack. It's cute how so many "home improvement" trends have the net effect of removing functional value from the home in favor of trendy aesthetics.

[@PapaCharlie9]

7:40, in the US as of 2019, there is now a Section 199a tax deduction associated with REIT income. So the net tax ends up being a little better than the ordinary income tax rate, though still worse (for most people) than the qualified dividend tax rate.

[@Docklead]

Doesn’t the deduction only qualify when investments are sold at a loss?

[@PapaCharlie9]

@@Docklead Nope. It applies to REIT dividends that are not qualified dividends already nor return of capital. There's also a holding period and other requirements, and it does end in 2025 according to the way the act is currently written. www.reit.com/investing/investing-reits/taxes-reit-investment home.kpmg/us/en/home/insights/2019/01/tnf-kpmg-report-regulations-treatment-section-199a-dividends-paid-reits.html

[@williamrosa4005]

Something that I am having a hard time finding on the internet that I would like you to cover is how REITs are started. With regular stocks, the IPO process is fairly known. But how does the trust of a REIT is started and initially made public? Also, there is such a thing as unit/share dilution in REITs that deserve mention here, as that can erode the individual value of the shareholder's position over time.

[@michaeleldridge5640]

REIT's also have IPO's. Private individuals or groups build a large amount of real estate assets and eventually decide to go public to increase possible investors and to grow assets.

[@InvestorCenter]

REITs are a great way to get exposure to real estate with relatively small sums of money!

[@tysonkrehnke2835]

Hello, great insight. I think it's also useful to note that some "Dividend" paying entities have different tax implications in the US as well. When a publicly traded partnership such as the various oil stocks give you a dividend, it's always first considered return of capital. Meaning you dont pay any tax until you sell your position. Instead payments reduce your basis in ownership meaning you hit a larger gain on sale of those assets. After enough time your basis becomes zero and whatever your sale price is is the gain you hit. Fortunately long-term gain in nature.

[@mihaicolescu5309]

Man...your channel is great. I keep seeing new investors very addicted by investments they don't understand and think the stock market/investing is a machine that gives them wealth rapidly. They only see: "the price gone up 300% last year, i'ma put 10k in that and by the end of the year I'll buy a BMW with 25k and have 5k to spare"....ummm right. Keep up the good work

[@krystalhuhtala7395]

I think this channel is so underrated...

[@surfie007]

In Australia dividends by Australian companies usually come with a franking credit. So because the company has already paid the 30% tax rate to the government, that money isn’t taxed again in your income. The franking credit (30% of that dividend) is used to lower the amount you pay in tax by the credit value. E.g you receive a $9 dividend by an Australian company which grants you a $3 franking credit. At the end of the financial year you would be taxed $100, but because of the credit you only are taxed $97.

[@akaman85]

Great video as always and particularly timely as many REIT's have taken big hits to their unit prices that are arguably well under their net asset values. So if picking and choosing the right ones, there is a greater opportunity now to take advantage of future unit appreciation (to enhance returns beyond their quarterly cash yields). But as always, there is appreciable risk if choosing ones with challenged balance sheets and allocations to properties that are likely going to be troubled for the foreseeable future.

[@TheFGrox]

11:37 The smooth transition to the sponsor. Linus Tech Tips wants to know your location.

[@Blue94Jays]

Thanks for including Canadian content in your videos! This helps a lot, never knew we only had .UT suffixes.

[@jacksonburch5337]

One word for you: “Real estate” - *That’s two words.*

[@iangomes]

That's the joke!

[@MrMineHeads.]

Congratulations! You have just found the joke! For this amazing accomplishment, you have been awarded with the satisfaction that you can identify a jest!

[@freddyc1995]

Two words for you: /woosh

[@DragonStoneCreations]

We read it as realestate.... See it's a single word

[@pahjammer9173]

REITs in long term Roth's are awesome.

[@demilishing]

Perfect timing for me! Filing my taxes and have us reits which I didn't know were taxes as corporations and I can't get the 15% withholding tax back. I was adamant with my account earlier in the week that I was able to get it back but now I'm pretty sure I was wrong all along! Thanks for the helpful video and link! :)

[@starpartyguy5605]

Some years back, in the era shortly after the 2008 crisis, quantitative easing left the prime rate at 0 and mortgage rates around 3%. Mortgage reits leveraged 6, sometimes 8 to one, yielding dividends of 20% or more. I was surprised to not hear any mention of how leverage affects the decision process, both for risk and reward.

[@adamalladina417]

You were referring to RRSP at 8:52 when the words say “tax at withdrawal” in TFSA I believe you keep all income even after withdrawal.

[@cosmicmauve]

"What are you 5?" Love it. My type of sophisticated humour!

[@menumlor9365]

0:10 literally the beginning of every "Get rich quick" real estate ad minus the stacks of cash in hand.

[@joe97nsx]

Great explanation. Best video I have watched on REITs. I have held REITs as well as direct real estate for a few decades and you hit on a lot of points that cover ownership of them in both the US and Canada.

[@ElvishShellfish]

I feel weird investing in residential REITs given the high rent prices. It feels like I'm just riding the backs of the working class. Should something so fundamental as housing be seen as a space for investment? That doesn't feel appropriate to me. Investing in new housing, maybe, but not just buying and charging rent from existing properties, squeezing the renters market.

[@darkpowerxo]

someone finally explaining canadian stuff!

[@abdullaalmosalami]

That intro is life. 10/10

[@ChampagneCents]

This was a really fun break down and easy to understand! When I learned about REITs it blew my mind, and now they give me the bulk of my portfolio.

[@mohammedislam2582]

Real Estate!!! KZbin Financial Gurus' golden asset class

[@fififinance7469]

REITs give you the exposure for sure - but one of the advantages of the investing in real estate directly is the ability to leverage the asset and also have it as a diversification from your other equity type investments. However, during a correction, a REIT has had a co-efficient that has mirrored the general equity markets... well balanced video :)

[@jherc12990]

This is a misconception,reits also use leverage to boost growth and have better economies of scale than a private real estate investor or an regular individual. Paired with appreciation the return is 2-3% better than direct real estate. There’s a limited amount of financing someone can do for building an apartment complex or warehouses across multiple states - let alone the management of those assets.

[@tomselvijssusts1996]

If reits go bankrupt, what happens to the shares and underlying properties? Can they even go bankrupt?

[@toonces6587]

See, I wasn't sure about the beginning look but then it took off to be probably the best 15 seconds of my life

[@tradingnewbs3347]

"I got one word for you: Real Estate." But that's two.

[@0728jacobson]

@The Plain Bagel, would you doing a video explaining how tax loss harvesting works? thank you

[@dryoutube]

With working from home and covid, one has to be even more cautious with buying REITs. Always research before buying!

[@williambetzelberger6128]

For watching both GS, and TPB I loved the dig. Happy investing

[@suvajeetdatta1220]

There is only one REIT in India :( And you have to buy at least 200 units! That's 1/10th the price of a normal small residential unit and you can't get any loans for that. Also, only commercial reits are allowed, no residential reits.

[@gageyeager6693]

Can you buy international?

[@Doom1461]

Lol loved the Intro and outro! Keep it up :)

[@tbedre5548]

😂😂😂the Graham part..,thanks for the knowledge bro💰💯📈

[@arch.amielpatrickpunzalan2787]

I'm glad I found your channel through Coffeezilla! You're content is gold man!

[@lastempire7302]

Couldn't buy a house in a better time, kudos to you Richard!

[@marcoinvesting5339]

Your channel's literally made me start a *Personal* *Finance* channel here on KZbin. Thanks for the motivation *The* *Plain* *Bagel*

[@arjunsatheesh7609]

Great video and congrats on your new home.

[@MrNaufan]

The Plain Bagel is basically Techquickie for finance

[@AJO09]

Banks and REITs got hit the hardest in this pandemic. People are still unable to pay off their rent + loan defaults. Everyone must do their due diligence before investment. Yes, I’m sure this guy might know what he’s doing, but I had to add my .2 to make sure people understand the market and what they’re doing before spending their $$$.

[@christopherliang6879]

Right after I bought my first shares of REITs!!!

[@BattleFieldGalaxy]

So no one is gonna talk about how he's holding his phone upside down?

[@fififinance7469]

drats - i missed that, i was too into the content.

[@Grymyrk]

Great job! With that Tim and Eric style intro. It's free real estate.

[@ben10mama]

I'm personally a REIT lover, in my opinion I'm not worried about the taxes so much

[@MarcustheWu]

His little "oh" at the end killed me. Like a little puppy.

[@CotySchwabe]

Best intro yet

[@dylanl3942]

Haha awesome intro!! I'm loving the videos and this one just happens to be on my birthday! Keep up the great work

[@businessguide6219]

Reliable and humurous, the kind of resource I'm looking for!

[@Hamlet137475]

I bought REITs Index from Vanguard 5 years ago. Very underperforming. Do much better w/total market index. Also w/COVID-19 being the new normal, and there already was a commercial real estate glut before the whole pandemic, REITs are not a good choice in investment for value. They do bring in some dividends but not a whole lot.

[@Ruvah2k]

the way this video began made me focus and understand what you said afterwards. Funny and relevant at the same time, i love it .

[@dindings]

Invest in real estate... housing prices NEVER fall... Circa 2005

[@DannyLuu]

That intro was gold! aha

[@FunnyAsian00]

I had no idea this dude is from 🇨🇦🇨🇦🇨🇦🇨🇦👍👍👍

[@tullyparker]

You are one of the coolest people on KZbin.

[@nmorrill]

Thanks for your always helpful (& hilarious) videos, & congrats on your new house! :D

[@zacharypickvet1857]

I Love REITs

[@jamesiu1234567]

So is it more tax efficient to hold REITs in a TFSA and the rest of the portfolio (stocks/ETFs) in a taxable investment account?

[@proteus404]

In Canada dividends paid by reits are usually non-eligible dividends so they are taxed at a higher tax rate compared to eligible dividends from Canadian companies. Having a REIT in a TFSA or RSP is better tax wise compared to having the reit in an unregistered account. If you have enough TFSA contribution room have reits, stocks and etfs in a tfsa and pay no tax on capital gains and dividends.

[@luisc.2600]

Your videos are gold! Congrats for your first house.

[@marcl3928]

10/10 intro

[@robertmccully2792]

Buying a house at the top of the market is asking for trouble. But as a long term investment it makes sence.

[@investingbeginningtoend4963]

I love Reit's, but they do tend to dilute shares to raise money for more property purchases

[@decapoli156]

Perfect, as always. Good job!

[@nerdsemdividas2364]

From Brazil 🇧🇷

[@callumstirton3772]

Great Video, Could you do a video on the CPP? I'm a bit confused about how it works/it impacts on Canadians' retirements.

[@connormac2652]

Nailed that intro

[@stephansobolev2635]

Wow I deadass thought stock dividends were taxed as normal income. What a pleasant suprise lol. Although now I gotta rethink my passive income portfolio.

[@MaximShelkov]

Awesome videos! Thank you so much, I’ve been learning so much through your videos :)

[@yyyyyyyyyyyy22]

i love these videos from you Richard!

[@miltonromero5533]

Lol the end of the video is the best. Great job dude.

[@knightscrusader007]

Great informative content dude! Keep it coming !!!

[@TheEmin3mFan2]

I would be interested to see a more in depth video that covers the pros and cons of REITs

[@OperationAndrew.]

You should wear those sunglasses all the time!

[@davidbrooks8809]

One if my Favorite channel$

[@bersah4517]

Great video as usual Richard

[@pablocano5544]

Awesome video! Thank you. Quick question: does the tax characteristic of REITs also apply for REIT ETFs? Thanks!

[@Omar-et7sb]

yes

[@MM-cc9cd]

Just an idea. How about a dive into SPACs, common shares and warrants. And how it all works.

[@The_Blanco_Bronco]

30% of Americans didn't pay rent last month. Gonna steer clear of REITs for now.

[@TCBumby]

Hahaha love the intro segment.

[@Meowsaurus-TV]

Keep up the great work ! Nice content!

[@jenweatherwax7113]

So good! Thanks for breaking it down

[@vtsormpa]

Great video once again! I have a question with respect to some ETFs. In general, I understand the basics however, as a citizen of the UK, I have exposure to Vanguard's VUSA.L which trades in the opening times of FTSE. Since this ETF tracks the S&P500, I do not understand how its price moves since most of the time this instrument is trading, it is pre-market in the US? Thank you for your time.

[@TimothyJesionowski]

I don't know about your specifics, but I do know most brokerages allow after hours trading.

[@ASidd1]

Excellent content as always

[@Karim-fq7vb]

Very helpful, We meed more intros like that 😂

[@shadoninja]

Good video! Also.... you gotta unpin Edge from your taskbar XD

[@MrSalehovich]

Graham "Steven" xD

[@veenoted]

Hi, thanks for your content. Love the analysis you covered here. I have a question: Will greater demand for commercial REIT drive commercial rental prices higher? I have a hypothesis that a greater demand for REIT will motivate REIT companies to pay more dividends and these dividends are directly obtained from rental fees paid by commercial retailers.

[@snomonster3]

Little late to this but no. Like in every asset, higher demand will raise the value of the REIT and lower the expected future returns (your now getting a smaller dividend relative to the price you paid). If anything high real estate values are an incentive to build more commercial real estate, which would add supply to the market and lower rent.

[@steak5599]

Financial Advisor: Buy REIT! they are the safest bet for cash flow investment! COVID-19: Hold my Corona, I am going to end this guy's whole career!