The fact is, most average Americans, investors or not, don’t have the time, expertise or money to invest like Blackstone or Colony Capital. Thankfully, they don’t have to.
Real Estate Investment Trusts, or REITs, are a great alternrnative to investing in property directly. Here’s why…
Like Rodney says, most investors don’t have the risk tolerance that a deep-pocketed firm like Blackstone has.
Say you find a gem of a deal in a foreclosed home down the street from where you live. You run the numbers and you learnrn that, on paper, you could earnrn 5% to 20% if you bought the house and rented it out. Let’s say the house costs $50,000 and you think you can rent it out for $10,000 a year.
So you get excited. Great.
Except, what if you aren’t willing to risk the full $50k because it’s your entire life’s savings? You can’t buy just half the house. You’ve got to pony up the whole purchase price. And more or less, you’re risking the full amount.
With REITs though, you can invest as much, or as little, as you feel comfortable investing.
Liquidity is the other advantage to REITs.
The minute you buy a house you have liquidity risk. That is, the chance that you won’t be able to find ANY buyers willing to take it off your hands at ANY price if you ever needed to sell. You could be locked into the investment.
Not so with REITs, which trade just like stocks and ETFs. You can buy today, change your mind, and sell tomorrow.
REITs aren’t new to Boom & Bust subscribers. We’ve made income-generating investments, like REITs, a clear focus of our model portfolio. So far we’re pleased with the results…
Here’s a chart showing the performance of three REIT investments since the start of 2013:
The white line is the Vanguard REIT ETF (NYSE: VNQ). This is not in the Boom & Bust portfolio… it’s just a good benchmark.
The green and blue lines show the performance of two REITs that we recommended to Boom & Bust subscribers, one in 2011 and one in 2012.
As you can see, one is tracking the Vanguard benchmark fairly well. The other REIT is on a tear! It’s up nearly 50% in just the last five months!
All told, we’re enjoying open gains of 77% and 22% on these two REITs, inclusive of the payouts we receive every quarter.
If this type of property investing sounds like a good idea… we agree.