§ 01
| Factor | Public REITs | Direct Ownership |
|---|---|---|
| Liquidity | Buy/sell in seconds | Months to sell a property |
| Minimum investment | One share (~$20–$200) | $50K–$500K+ down payment |
| Diversification | Instant (hundreds of properties) | Concentrated (1–2 properties) |
| Management | Professional management included | You are the landlord (or hire one) |
| Leverage control | Set by REIT management | You choose your LTV |
| Tax benefits | Limited (pass-through dividends) | Significant (depreciation, 1031 exchanges) |
| Correlation to stocks | Higher (trades on exchange) | Lower (private market pricing) |
§ 02
REITs and direct real estate are complements, not substitutes. REITs provide liquid, diversified exposure. Direct ownership provides tax advantages, leverage control, and forced equity building through mortgage paydown.
§ 03
Compare the total return of a REIT index (like VNQ) to the S&P 500 over the last 10 years. REITs provide diversification because they don’t move in lockstep with stocks.
§ 04
You have $100K to invest in real estate. Which approach gives better diversification?
§ 05
§ 06
Direct rental ownership vs REIT — both yield ~6%. Which has better long-term wealth-building economics?
Five questions · AI feedback
Sit with the ideas.
An investor is choosing between buying $200,000 in Realty Income (O) stock yielding 5.5% or making a $200,000 down payment on an $800,000 rental property generating $48,000 annual NOI with a $600,000 mortgage at 7%. Which generates more annual cash flow, and what are the key tradeoffs?
Why: