If you want to invest in real estate through your retirement account, isn’t the easiest way to do that to buy into a publicly-traded REIT – a real estate investment trust – rather than buying physical real estate? This question comes from Mark, an ophthalmologist in Atlanta, Georgia. Mark – and SDI Nation – you’ll get the answer to that question RIGHT NOW. I’m Bryan Ellis. This is Episode #211.
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Hello SDI Nation! Welcome to the podcast of record for Savvy Self-Directed Investors like you, where each day, we guide you to FIND, UNDERSTAND and PROFIT from exceptional investment opportunities! Hey folks – be sure to stop by SDIRadio.com/211 – that’s the page for today’s Episode #211, where you’ll find all of the links and resources I mention on today’s show. Or just text the word SDIRADIO to 33444 and we’ll send you all the info you need.
It’s a beautiful day in America, my friends! The real estate portfolio of the Ellis Household expands by 3 more properties today, each of which is a single-family property that’s fully renovated, rented, managed and producing exceptional cash flow! Well, technically, it’s not the Ellis household, as we don’t own valuable assets in our own names, nor should you. But you get the point! Hehehehe
Folks, I feel like the luckiest man alive to have the chance to do deals like the one we’re closing today. Can I tell you how this deal went down? I think you’ll appreciate it. So one of your fellow listeners – hey Chip! – had asked to purchase a portfolio of rental properties, which we arranged for him. Sweet deal… only about $150,000 investment, and the net yield after ALL expenses was solidly above 10%. Well, that’s what Chip was interested in doing, but something happened in his personal life and he needed to delay that purchase for a bit.
Well, folks… ultimately that was for my benefit. Because I looked at that deal and realized, yet again, that what I say is true: I don’t sell assets that I wouldn’t buy. So this package of 3 properties, well… my lovely wife Carole and I decided that they’d be an excellent addition to our own portfolio. And fate has favored that decision so far, because the appraisals came in even higher than we expected. So now, we’ll have 3 more properties yielding double-digit net returns… and I couldn’t be happier!
So, onward to the excellent question from Mark, an ophthalmologist right here in the ATL, Atlanta, Georgia, a BOOMING city that offers all of the wonderful things that come with a big city… but at a substantially lower cost than virtually every other big city!
Mark asks this question: “Hi Bryan, I really enjoy your show. I’d like to increase my portfolio’s exposure to real estate. I have about $250,000 I’d like to invest. I appreciate your endorsement of turnkey-rental properties and I’m seriously considering that approach, but wouldn’t it be much simpler, and just as effective, to purchase a publicly-traded REIT rather than buying physical real estate? Thanks again for your show, I’m glad you’re back.”
Mark – thanks for a great question!
For those of you who may not be aware, a REIT – more precisely, a real estate investment trust – is a company that buys cash flow-producing real estate and, by law, must pass on 90% or more of the net income it generates to its share holders. It’s kind of like a mutual fund that invests only in cash flow producing real estate. And there are several REIT’s that are publicly traded, which means that all you have to do to invest in them is to call up your stock broker and place an order, and voila! Suddenly, you’re generating real estate income without the hassle of buying or owning physical real estate.
Sounds enticing, doesn’t it? It is! It’s a sexy proposition if you’re looking for the benefits of real estate ownership. Taking the REIT route is certainly simpler than owning physical real estate, and it doesn’t even require one to set up a truly self-directed IRA. The partly self-directed IRA’s at Schwab or eTrade or elsewhere will work fine for investing in REITs. And since you’d likely choose one of the publicly-traded REITs, your principal is quite liquid, so you could convert your investment back to cash very easily.
It’s not all roses with REITs though, Mark. There are 4 big votes against them, in my opinion:
So should you invest in REITs or physical real estate? I believe you should default to PHYSICAL REAL ESTATE unless one these two things are true about you:
So then, Mark and SDI Nation, if you’ve opted towards physical real estate, the question becomes: WHICH property do you purchase? Hey, if you’re a full time real estate investor, then you’ve probably got that covered. But if not – if you’re an ophthalmologist like Mark or an engineer or an entrepreneur or whatever it is you do – and you want to continue doing that thing while enjoying all of the benefits of real estate ownership, then do this:
Stop by SDIRadio.com/211 and check out a case study of an excellent – but rather common – turnkey rental property deal. Remember from before… the type of property where you write one check and suddenly you’re the owner of a property that’s renovated, rented, and managed without your involvement. This particular deal is actually available… and it’s a great example of what’s possible.
My friends, have a wonderful weekend and remember this: Invest wisely today, and live well forever!
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