Many think that investing in REIT stocks resembles purchasing real estate straight, but I have some arguments to point out the differences.
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alot depends where you buy the real estate, what country you live in what gets extra taxed etc.
Nice video. The only thing better about publicly traded Reits is liquidity. You can buy and sell them with very little transaction fees. Buying and selling your own properties will cost you between 5-10% depending where you live.
Owning your own property is great if you can buy them at a good price and manage the property yourself.
When talking about investments everything is better about REITs. Besides that a home to live in is a home to live in, not an investment.
its not a nice video , i like sven but his comparions and research are poor in this video , for a start REITS and real estate can vary wildly geographically , he compared personal leverage on a house with the REIT being leveraged, the difference is immense, maybe REIT s lose their appeal if the rules are put $20k in at the start then $1000 i every month for 30 years and if you miss 3 payments you lose your shares, but thats buying a house
Indeed, liquidity is a great point.
I have to say the best return I ever had (unrealised so far), is the property I inherited from my father ( bought my brother out). rented it out, fixed it up a bit, had plans to develop it then covid and things went crazy…now it’s worth 3.5 times the original value…..not because of me being smart, just lucky, and frankly inexperienced and slow to organise a development plan…which worked in my favour! But I see clearly the value of the property, which looks good on the balance sheet, and the revenue from the rent, which looks good on the income statement. Two different things for sure. and the tax deductions from the expenses of upkeep and a portion of the mortgage interest, insurance, etc. The piper comes due on all that when I shuffle off this mortal coil…if I don’t organise things correctly.
Happy for you! My RE investments have all failed. I eventually realized I don’t have the character to be successful in it.
Sven mispronounced ‘Milan’ in the weirdest way possible.
ma che cosa ho detto, una mia versione, forse Olandese :-)))). Ah, Milano, ogni volta che ti vedo, mi prendi allo stomaco!
@Value Investing with Sven Carlin, Ph.D. bene, hai vinto
I disagree with the management fees for REITs being the cap rate – dividend yield. The money not distributed will be reinvested in new properties for the REIT, improving the future earnings and future dividend yield. Thus the value of the REIT inceases. How is that a management fee?
Thanks for the shout out Sven!! This channel inspired me to get that MBA finally. 3 more weeks til graduation 🙂
Its never going to be 100% because its the cost of materials and your “own time money” because you could be at home with family or being at work making 25-30 dollars/euros per hour.
Renovate a house take months of actually WORK.
Return on properties in Poland is around 4%. I prefer dividend of 5.5% and no work.
You also forget that you need hundreds of thousands if not millions in your currency to buy any property. You can invest 1$ into reit. So maybe for very few this is alternative.
Re is far from optimal.. but reits are also risky
Right now I am getting 9-10% in my Mexican industrial REITs, I definitely can’t afford my own property and I think I am fairly positioned to take advantage of the nearshoring effect in Mexico right now, so REITs are the place to be for me at the moment.
i agree with you in principle but i m not sure the risk of mexican REITS v USA property are the same
Absolutely agree. If you check the same Realty income returns in the last 10 years – they are pennies. Investing in your own real estate you not only get rental payments bus also real estate grow in value (capital gains) – its just higher risk to invest in your own real estate, thats all.
I think, you get more profit when you buy reits in recession than real estate in recession on mortgage, there are also lower costs, time wasted and lower taxes
Depends if you want to invest or do business. You can not compare reits to real estate, because with real estate there is time wasted. Compare reits to stocks or etf like vwce and compare real estate to real business with time wasted.
Hi Sven. In the last several videos you share your thoughts on REITs, the current market, and American stocks, and all are negative. Is there a reason we should invest at all, or start accumulating money for real estate instead?
He was negative all year long…and the market just got higher and higher
Thank you!
thank you!
I think that for personal real estate the real costs are about 30% of the rent..the estate agent may take 1 month per year.. the building management costs and depreciation on fixtures and fittings..plus periodic renovations, repair costs, vacant periods, tenants that trash your home, tenants that leave without paying the last rent.. rent arrears..etc. some can be reduced by good tenant selection..but even that is no guarantee. Personally i like european shopping center reits. In expensive markets like Luxembourg, you will be lucky to get 3% net yield.
thanks for sharing!
I have invested directly in RE and they have been my worst investments. I don’t recommend unless perhaps the RE is your own home. REITs come with agency costs partially because they remove the need to personally put in the work to maintain and improve the RE value. It’s of course debatable what price is right for the REIT agency cost. But regardless, that agency must be in some form value-creating because the REIT investors are willing to pay for it.
thanks for sharing!