The Problem With REIT’s – Real Estate Investment Trusts
Kris Krohn here with Limitless TV and today, this video is dedicated to Will who sent in a video asking questions about REITs, what are they and are they good viable real estate investment options. Will, thank you so much for submitting this question. Before I answer it, I just want to talk about what a REIT is, it stands for a Real Estate Investment Trust and what it is is it’s usually a group of investors that are using the stock market or through some kind of publicly traded vehicle or even sometimes private to collect all of people’s different money and then what they’ll do is, they’ll make choices on how to invest that. Now there’s a certain percentage of money that you get, there’s a certain percentage of money that they get and so the REIT is kind of like the stock market, it can have dividends, it is real estate based and so your question is, is that a good middle ground? For me, it’s an absolutely no way middle ground and the reason why is, let’s say that I did have $40,000 or $50,000, I could either put it into a piece of property that I own, I control, that cash flows for me and with equity for me, with growth for me or I could put it in the REIT and unfortunately, these REITs often pay out really small dividends and the people that are running them actually have the ability to take some really healthy generous portions and so instead of brokering your money, claim your money. Do you understand the difference there? There’s brokering your money, there’s claiming your money. Same thing like giving your money to the stock market, that can be done really intelligently and there’s some really great ways of doing it but real estate, there are so many juicy profits for you to earn. Now when might I consider a REIT? Will, sometimes a REIT will allow you to put in a really small financial investment maybe two or four thousand dollars and even though I can show you ways of doing real estate with very small amounts of money, that might seem like a really convenient way to get involved, I would look at their compensation structure, I would look at what they’re investing in and I would look at their historic payouts. Historic payouts means how much have they been paying out quarterly or annually over the last few years and then compared to some of the things that I’m claiming are available to you in these different YouTube videos and then really find out what is the arbitrage between them, what’s the Delta, what’s the difference. You might find that if you’re making way more money investing on your own, that might be why I’m not recommending the REIT. If however the REIT has a great historical performance and they’re actually paying out really well and they’ve got great long-term track record, well, if it’s a small margin of difference then you may want to actually invest your money that way. So look into it, in my experience, there’s a really significant gap between what they’re offering and what you can get on your own, if that’s true with the options you’re looking into then I probably forego the REIT and just do your own properties. If you’ve got questions like Will, then go ahead and submit a video with the instructions below and we’ll create a video answering your questions for you as well.