I would like some advice on this as it's been perplexing me over the past few days.
Say you are looking at an REIT with a 3-5% annual yield. That's about what you can expect on a rental property after property tax, fees, maintenance, etc. are all accounted for. The difference, of course, is that a mortgage is leveraged so your returns are multiplied.
So, I figured, isn't it essentially the same thing to buy an REIT on margin? What's really the difference, in terms of risk? I don't want to just buy on margin because I'm obviously not an expert at all, but it seems to me like a reasonable alternative to buying a house that requires a smaller down payment, less management, and less headache. The 3-5% dividend can cover the loan, exactly like with a house.
The major minus I can see is not having flexibility in managing the asset- you're basically trusting someone else. But from what I can tell REITs are by definition at the same risk level as the real estate market in general, which you subject yourself to when you buy a home.
So, what are you guys' thoughts?
Submitted March 24, 2017 at 12:27PM by Dynamaxion http://ift.tt/2nQd67A
