REITs over buying property?

Veteran landlords might scoff at the idea, but real estate experts are point to certain REITs as a safer bet than traditional real estate investments.

By John Tenpenny
It’s an affront to seasoned landlords, but some experts are offering reasons why investing in REITs may be a more successful strategy than owning rental properties.

With many calling Canada’s housing market overvalued, financial website The Motley Fool is advising that buying REITs is preferable to buying real estate, offering six reasons to back their bold claim.
1. Diversification

One of the risks of buying one property is you’re exposed to the local market and most people don’t have the ability to predict which are will be the best spot for their investment.
2. Professional management

Because REITs own hundreds of different properties, they can easily afford to hire a professional management, something that isn’t worth it for someone who only has one or two properties. It’s this kind of efficiency that makes REITs a better investment.
3. No headaches

Without professional management, landlords are at the mercy of professional tenants who can cost them thousands of dollars and even good tenants required maintenance. Better to take your money and buy a REIT than spending your weekends fixing up a property.
4. No leverage

Small landlords aren’t just taking on location risk when they first start out. Chances are they’re using a ton of debt to acquire that first place, which automatically makes it more risky.
5. Better cash flow

The ability of REITs to continue to deliver steady returns is a better bet than investors who own many of their properties in certain neighbourhoods of cities such as Toronto and Vancouver, which as driven down rents and eaten into investor’s profit.
6. Smarter buyers

While there are tons of smart real estate investors out there, REITs are run in a professional manner, which means if the numbers don’t make sense, [REITs] just don’t buy.

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