I have stopped buying REITs to buy real estate instead in some instances in the past. REITs like Realty Income (O), SL Green (SLG), Medical Properties Trust (MPW), Vonovia (VNA), or Prologis (PLD) are not always compelling investments. At times, they may become overpriced and risky. Rental properties can be better investment opportunities in some cases. I discuss when I favor private property investments. You can access my entire REIT Portfolio by taking a 2-week free trial to my REIT newsletter, High Yield Landlord: https://seekingalpha.com/checkout?service_id=mp_1268 Please follow me on Twitter: https://twitter.com/askjussi and subscribe to my YouTube channel.
In most cases, I favor REITs because they offer better returns with lower risk:
Why REITs earn higher returns than rental properties? REITs enjoy significant economies of scale. They develop their own properties. They skip brokerage fees. They do sale and leaseback transactions, etc. To give you an example: Realty Income $O has managed to generate 15% annual returns for its shareholders by buying Class A net lease properties with a conservative 30% LTV. Most private net lease investors would have been happy to earn a ~10% return.
Why REITs are safer than rental properties? REITs are liquid, professionally managed, diversified, less leveraged investments, and shareholders enjoy limited liability. With the right adjustments, REITs are also less volatile than rental properties.
But there are exceptions. There are 5 cases in which I would favor real estate over REITs:
00:42 - International real estate markets 1:42 Value add opportunities 2:33 Buying your own home 3:06 Specialty property sectors (FarmTogether) 4:21 Synergies with your career
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Important Disclaimer: Leonberg Capital OÜ does not hold positions in the REITs highlighted in this video. This video is impersonal and does not provide individualized advice or recommendations for any specific person. Viewers/readers should not make any investment decision without conducting their own due diligence and consulting their financial advisor about their specific situation. This video is for entertainment purposes only and you are responsible for your own investment decisions. The information is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The opinions expressed are those of the publisher and are subject to change without notice. This YouTube channel is managed by Leonberg Research OÜ, a subsidiary of Leonberg Capital OÜ.
