Have you ever thought about investing in real estate, and then years later thinking how silly it was that you didn’t buy that one property that is worth so much more now? There is a way to invest your money in real estate without having to have the knowledge or ability to read the future of real estate.
REIT (Real Estate Investment Trust): Investing in a company that owns and runs properties that the company believes is income producing.
With this strategy you can invest your money in a company that allocates your money in certain real estate projects that they think will produce you a preferred return (cash back for your investment).
APARTMENT SYNDICATION: Pooling money with other investors to passively invest in an apartment.
With this strategy you can invest your money with someone that you typically know who does a lot of investing in real estate, and work together with other investors to buy an apartment building. With this strategy you will be able to see all the numbers, and know what the property information is. You will also be able to relish in the preferred return, AND get to celebrate when the property is sold and you are able to receive profit from the sale.
These two real estate investment strategies are a great way to passively invest your capital in to real estate without having to do any landlording. Both of them offer a return on your money each quarter or year. Let’s hash out the two differences and see who wins…
Annual Returns
REIT: Typically, when you invest in a Real Estate Investment Trust, you get an annual return of around 10-12% a year. Those are great returns on your investment! +2 for the REIT
APARTMENT SYNDICATION: Typically, when you invest in a syndication, you get an annual return of around 8% a year. These are also great returns, and can still be more consistent than the stock market. +1 for the SYNDICATION because it’s a little less than the REIT.
Hold period
REIT: With a REIT, you can put your money in and pull your money out at any time. This is the beauty of the REIT because if something comes up and you need liquid cash, you can get your money out quickly. +1 for the REIT.
APARTMENT SYNDICATION: When investing in a syndication, it is a lot harder to pull your money out before the hold period is over… which is usually 3-5 years. You will still be collecting preferred returns each year, but if you need all your capital out, you will have to get someone to buy your shares out. +0 for the APARTMENT SYNDICATION.
Sharing the profit
REIT: When investing in a REIT, you only get a preferred return… you do not get any of the appreciated value in the property. +0 for REIT.
APARTMENT SYNDICATION: This is a great advantage to investing your capital in an apartment syndication. You will get to share the upside of the investment property at the sale. Sometimes, you can get a 20% cash-on-cash return! With this perk, investing in an apartment syndication is the better strategy hands-down. +5 for the SYNDICATION.
+3 for the REIT
+6 for the APARTMENT SYNDICATION
Which one would you rather invest your money in? Do you have advice from either investment strategy?
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