Gary Beasley CEO Roofstock, an online marketplace for buying, selling and owning single-family rental investment homes, has the second part of his look at REITs vs. owning actual investment real estate.
He provides some excellent insight into the advantages for new real estate investors.
Low Minimum Investment
While you can buy a REIT share for $10 or less, it, of course, takes more capital to own properties directly. For example, in order to qualify for attractive financing to purchase investment homes, you typically need to put down at least 20% of the value of the home.
Additionally, if you are concerned about the potential for expenses to be higher than your revenues in a particular month due to non-recurring expenses or maintenance, it is a good practice to maintain a contingency “slush fund” of 1-2% of the total purchase price for general repairs and times when the property may be between tenants.
If you are looking to get some exposure to the real estate industry and want to dip your toe in the water, REITs are a great way to get started.