Monday, September 7, 2015

Should You Buy an Investment Property or Invest in a REIT?



How do you decide if you want to be a landlord or not? Well, there are several things to consider...first of all, how active do you want to be in your investments? How active should you be in your investments? If it's not your full time job, you still need to pay attention to your investments. This includes your stocks, bonds, retirement accounts, real estate investments, etc, where ever your money is kept. If you don't pay attention to it, who will? If it's not your full time job, even more reason for you to check in. This can be weekly, monthly or daily depending on what vehicle(s) you invest your money into. I have a third party property management company handle my rentals and I check in with them at least once a month. In addition, I review the #'s every month to make sure we are on track with rents and renewals. You may need to do this more or less depending on your preference, number of rentals and if you use a property management company or not. For the stocks that I actively trade, I check on daily. I also spend a few hours every month on my asset allocation and overall performance.

So, what does this mean to you? You need to do what is best for you. How much time do you have to devote to your investments? Do you want to add real estate to your investment portfolio? According to Barron's recent article, "The Allure of Mortgage REITS" by Amey Stone some REITS are paying up to 12% annual yields and the are on sale right now for deep discounts. So, this begs the question, if you can get 12% returns with little or no time investment, why would you build your own real estate portfolio?

A REIT can offer you a (hopefully) diverse portfolio. This can be across property types such as commercial or residential single family homes or multi family. Or  it could be spread among properties in various markets across the country. Some REITS are traded like stocks, some require a minimum investment and can be difficult to get out of, so do your homework.

If you buy your own real estate investment properties you have a few models to choose from...buy and hold, fix and flip or a combination there of. Things to consider include available cash, available time, access to general contractors and  construction teams (if you are considering fix & flip), opportunity to leverage, return on investment goals and much, much more. You can start with one rental or 2nd home that you rent out when you're not using it, see if you have a taste for being a landlord and go from there.

I don't suggest you jump into either real estate investing or a REIT without doing your homework. Real estate can be an amazing investment and it's not for the faint of heart.I hope you find this information thought provoking. If you have questions email me at info@bestmortgagebook.com.


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