Here’s a way you can invest in real estate with as little as $100…it’s a REIT. But how does this compare with just straight up owning rental property, and is it even worth owning a REIT in the first place? So lets analyze the pros/cons of each! Add me on Snapchat/Instagram: GPStephan
The Real Estate Agent Academy: Learn how to start and grow your career as a Real Estate Agent to a Six-Figure Income, how to best build your network of clients, expand into luxury markets, and the exact steps I’ve used to grow my business from $0 to over $120 million in sales: https://goo.gl/UFpi4c
Join the private Real Estate Facebook Group:
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Like I mentioned, this is an investment trust which acts as a holding company for real estate. By investing in this company, you thereby are entitled to some of their profit, in the form of dividends.
Pros to doing this:
-There’s pretty much zero barrier to entry. Anyone with $50-$100 can invest.
-It’s also really easy to buy into a REIT…open up any stock trading website or app, and boom, you’re done. You don’t need to go out looking for properties that cash flow for weeks or months.
-There’s also no management aspect of this. With a REIT you don’t do ANYTHING. You just buy it and forget it…done.
-It’s also really, really easy to sell…no need to pay a 5% commission, no need to show your home to buyers, no need to negotiate prices…it’s just as easy as buying a REIT. You just click “sell” and you have your money almost immediately.
-With a REIT, you’re really well diversified.
Negatives:
-How the income YOU get is taxed…you get paid in the form of a dividend. This is usually an amount that’s paid out quarterly, but it’s taxed as though it’s earned income, which means it’s taxed at your highest marginal rate.
-Because REITs pay high dividends, they usually don’t increase much in price.
-The third downside is that you don’t have any control over your investment…unlike a property where you can pick the color to paint the walls, how to remodel the property, or how to manage the property and how much to rent it for - with a REIT, you have zero control.
-You also can’t build equity in a REIT like you can with real estate.
Investment Real Estate Downsides:
-High barrier to entry…you generally need a large down payment and will need to have the income to support the loan payments.
-The second downside to owning real estate is the time commitment. Finding the right deal is essential - and it can take a lot of time. Then you have the time aspects of managing a rental property.
-Lack of immediate liquidity. I can’t just sell my property for top dollar within a day - it just doesn’t happen.
Rental Real Estate upsides:
-You can leverage your money. While yes, a REIT does invest in leveraged properties and you own a portion of that, generally the returns aren’t as high as when you do it yourself.
-Your income from rents is generally tax free. When owning physical real estate, you can depreciate the cost of the property against your rental income. Compare this to paying 22-37% taxes on dividend income.
-You have total control over your investment. This means you can find a really, really good undervalued deal where you make a significant amount of money.
-You’re able to borrow against the equity in your home - completely tax free.
So at the end of the day, this is what it really comes to…
If your goal is long term equity, owning physical real estate is the way to go. When you buy an investment property, you’re continuously building equity in a tangible asset. Having more equity in your asset also gives you the ability to refinance over time and use the proceeds to buy additional assets and grow your portfolio. More work, more time involved, more money long term. However, if you have a little money and want some exposure to real estate, a REIT could be a nice way to diversify. However, since dividends are taxed as ordinary income, it’s best to hold the REIT in a tax advantaged account like a 401k or Roth IRA to avoid paying taxes. This way you get all the benefits of having exposure to real estate, without the tax consequences of paying a stupid amount of taxes on it. Not financial advice 😉
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
The Real Estate Agent Academy: Learn how to start and grow your career as a Real Estate Agent to a Six-Figure Income, how to best build your network of clients, expand into luxury markets, and the exact steps I’ve used to grow my business from $0 to over $120 million in sales: https://goo.gl/UFpi4c
Join the private Real Estate Facebook Group:
https://www.facebook.com/groups/therealestatemillionairemastermind/
Like I mentioned, this is an investment trust which acts as a holding company for real estate. By investing in this company, you thereby are entitled to some of their profit, in the form of dividends.
Pros to doing this:
-There’s pretty much zero barrier to entry. Anyone with $50-$100 can invest.
-It’s also really easy to buy into a REIT…open up any stock trading website or app, and boom, you’re done. You don’t need to go out looking for properties that cash flow for weeks or months.
-There’s also no management aspect of this. With a REIT you don’t do ANYTHING. You just buy it and forget it…done.
-It’s also really, really easy to sell…no need to pay a 5% commission, no need to show your home to buyers, no need to negotiate prices…it’s just as easy as buying a REIT. You just click “sell” and you have your money almost immediately.
-With a REIT, you’re really well diversified.
Negatives:
-How the income YOU get is taxed…you get paid in the form of a dividend. This is usually an amount that’s paid out quarterly, but it’s taxed as though it’s earned income, which means it’s taxed at your highest marginal rate.
-Because REITs pay high dividends, they usually don’t increase much in price.
-The third downside is that you don’t have any control over your investment…unlike a property where you can pick the color to paint the walls, how to remodel the property, or how to manage the property and how much to rent it for - with a REIT, you have zero control.
-You also can’t build equity in a REIT like you can with real estate.
Investment Real Estate Downsides:
-High barrier to entry…you generally need a large down payment and will need to have the income to support the loan payments.
-The second downside to owning real estate is the time commitment. Finding the right deal is essential - and it can take a lot of time. Then you have the time aspects of managing a rental property.
-Lack of immediate liquidity. I can’t just sell my property for top dollar within a day - it just doesn’t happen.
Rental Real Estate upsides:
-You can leverage your money. While yes, a REIT does invest in leveraged properties and you own a portion of that, generally the returns aren’t as high as when you do it yourself.
-Your income from rents is generally tax free. When owning physical real estate, you can depreciate the cost of the property against your rental income. Compare this to paying 22-37% taxes on dividend income.
-You have total control over your investment. This means you can find a really, really good undervalued deal where you make a significant amount of money.
-You’re able to borrow against the equity in your home - completely tax free.
So at the end of the day, this is what it really comes to…
If your goal is long term equity, owning physical real estate is the way to go. When you buy an investment property, you’re continuously building equity in a tangible asset. Having more equity in your asset also gives you the ability to refinance over time and use the proceeds to buy additional assets and grow your portfolio. More work, more time involved, more money long term. However, if you have a little money and want some exposure to real estate, a REIT could be a nice way to diversify. However, since dividends are taxed as ordinary income, it’s best to hold the REIT in a tax advantaged account like a 401k or Roth IRA to avoid paying taxes. This way you get all the benefits of having exposure to real estate, without the tax consequences of paying a stupid amount of taxes on it. Not financial advice 😉
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
Reits are life lol you have Reits in the S&P …. Don’t even have to touch drywall lol and I’m not waiting til 59 to touch my money 🤣 my job match can be enough for now
When you invest, you're buying a day you don't have to work
Thanks for the great insight into REITs. I have been looking heavily into them. I want to spread out my investments a bit more to diversify, but I don't want to buy a property or manage one physically. The one downside you mention is the gains tax on the dividends, which you can get around with an tax sheltered account. The best one if you have access to one is an HSA account. You can buy REITs with it and compound and tax out money even before retirement tax free using saved up medical receipts you just pay outside of the HSA so that investment money works for you.
Good job buddy
Where would you list a property you own with REITS?
What about REIT vs Index Funds (s&p 500) in a tax sheltered account?
How and where do I start my investment journey?
Liked for the wink at the end
Where do you get 50-200k to invest in real estate down payment
What’s the best reit on the stock exchange like Robinhood? (Besides Simon which is way too expensive)
So,
Reits are pointless because of taxing and not much gain.
Buying real estate is super expensive and lots of headaches.
Is there an option to invest partially in physical property besides partnership?
Don't you have to have a minimum amount to even invest in index funds?
What website would I use to start a REIT?
Thank you for the information.
Platform for REIT?
How do you feel about REITs that're mainly in the "strip mall" segment in the 2020s? I get companies that focus on living spaces/hotels. I'm hesitant, given the current pandemic (and post-pandemic) environment, to put money in office space/strip malls. I'm wanting to allocate maybe 5% of my long-term portfolio in REITs; I'm curious as to your take on the different genres (you being a real-estate genius and all).
Hey Graham, do you know a Good Broker for Europe?
Etf, mutual fund, index funds, reit, dividends stocks fund, and real estate is the best investment1
Bumping J Dilla-Life in the background, nice.
This worth a new video update as we close out 2020?
REIT's average about 11 to 12.8% in returns. Whether you are in a ROTH or traditional you will pay taxes. Roth also has limits on investment. If I were to look at distribution you would probably be better of investing in a mutual cash value whole life insurance that has no limits, grow tax free, pays a minimum guaranteed benefit on top of a 6% dividend with a payout distribution of 11% tax free and at its core its still a life insurance with a Death benefit. The only way to be taxed on this is if you surrender it and no one in their right minds usually would.
Returns are the most important facts about investment. Thank you.
Graham, what's your take on real estate syndication investing?
And you can't get a 80% loan to invest in REITs. Take out leverage and real estate is an under performing asset… Leverage changes the game
I'm wondering if the REITs worth it if your tax bracket at the 12% of course I will not be at that tax bracket forever just curious if it's really worth It?
Talking about REITS moving in place . . like other aspects of the publicly traded market there are laggers and outperformers, Realty Income's compounded average speaks for itself. As a full-time law student who simply doesn't have the time or energy for investing in rental property and dealing with tenants (bearing in mind that most Americans are paycheck to paycheck), REITs like Realty Income (and I'm about to take a position in STAG) have been a fantastic place to park some cash.
Finding out about REITs changed the game for me! I love real estate investing but this is way easier! They are constantly by best dividend payers.
Thanks for this, Graham. What are your thoughts on real estate and REITs with this pandemic going? More careful research before investing in something?
Thanks Graham for the wealth building tips.
I am heavily invested in Reits now,
When the market crashed I saw Reits dropping 50-80% I knew some won’t recover as much or at all but it was such a good deal that I probably won’t see again that I took the risk.
Already made 80% gain on profit and dividends are back , im getting $450 dividends every Quarter now the potential of the price doubling in the next year as well as the dividends doubling.
Only wished I had more money to invest, I am looking at buying my first property, I live in California but Las Vegas will be the place I buy first