Passive Real Estate Investing vs REITs

Direct real estate investments offer passive investors superior tax benefits, improved portfolio diversification and far less volatility then REITs. 

Benefits of passive real estate investing vs REITs include:

  1. Superior tax benefits - ability to defer 100% of taxes until sale. Direct owners of real estate can also transfer their tax basis to another property via a 1031 exchange. 
  2. REITs are extremely difficult to value
  3. Private real estate investments typically offer higher cash flow yields - most REITs pay 2-5% in yearly dividends, whereas a typical mobile home park investment returns 12-20% average cash on cash yields.  
  4. REITs (over the short term) behave more like stocks than real estate and are highly volatile. 

For a detailed discussion of the benefits of passive real estate investing, you can review our guest blog post on BiggerPockets: Passive Real Estate Investing vs REITs