4

Assume the following scenario: A person wants to invest $100k in REIT or buying a rental property. (Assume a property management company is used so we don't need to compare the work from each.)

  1. What effect (if any) does getting a mortgage have for buying the rental property? Does this increase the long-term value of real-estate compared to REIT?
  2. Has someone measured the average capital appreciation of REIT vs owning a home over time? Is one a clear winner?
  3. Is there a measurable tax benefit to investing in real-estate? How big a difference should this make?
  4. Are there long-term average returns that should be used for owning a rental vs REIT to calculate an expected annual return?

Thanks!

6
  • 2
    This is really hard to analyze. So many different REIT's and the options on rental property are also limitless. I am guessing you are trying to decide which would be a better investment given 100k - REIT or rental property? It almost isn't a way to compare as rental property/investing is its own beast.
    – Ross
    Sep 29, 2015 at 16:47
  • Are you looking to do this with personal funds or IRA/tax deferred funds??
    – Lindsey
    Sep 29, 2015 at 16:51
  • 1
    There is much variation. This site shows the variation in rental returns: 2% to 25%. This REIT is averaging 7.87% over the last three years (but not the -6.07% YTD!). REITs have the bonus of not requiring any personal management involvement.
    – Peter K.
    Sep 29, 2015 at 16:54
  • @Lindsey not IRA specifically, just generally. Sep 29, 2015 at 17:25
  • Since your question mentions taxes, please specify which country you are asking about. Taxes aren't the same everywhere. Sep 29, 2015 at 20:07

1 Answer 1

4

I think that this mostly depends on your personality, not the return on investment. Are you willing to get nasty phone calls in the middle of the night about a busted water pipe? Can you weather the lack of income if your rental property goes unoccupied for a year? Are you willing to clean up after a resident trashes the place before moving out?

A REIT removes you from all similar considerations yet provide you with a reasonable income.

I am both a renter and an owner of a REIT.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .