Green Earth Real Estate

REITs vs Rental Properties: Which Is Right For You?

REITs vs Rental Properties Which Is Right For You

REITs vs Rental Properties Which Is Right For You

Investing in real estate can bring in stable steam of income in the long run. Likewise, many investors either choose to own their own rental property or go down the REIT route. Which can be a tricky decision to make as both the mentioned options have their respective pros and cons.  

Although real estate is a lucrative endeavor, in this article we will navigate the differences between REITs and owning a rental property.

 

What is a REIT?

 

REIT: Real Estate Investment Trust.

It’s a method to invest in income-producing property across a range of sectors without having to own one. This type of investment is best for people that want a steady source of cash flow, minus the downside of ownership in regards to the head on responsibility.

There are three types of REITS that are being offered in Pakistan, which include: 

1. Rental REITs

This scheme was made specifically for those wanting to generate income through residential or commercial real estate. A Rental REIT is initially bought and then rented out by RMC. Finally, the revenues accumulated are divided between the unitholders. 

2. Developmental REITs

Developmental REIT is basically when REIT acquires certain land in regards to commercial, industrial, and residential development. Usually through construction and then soon after is sold or rented out. Furthermore, all the proceeds obtained from selling or renting properties are issued to their designated unit custodian. 

3. Hybrid REITs

It is a combination of Rental and development REIT strategies in terms of investment of properties and mortgages. But this scheme is not favored as much as equity REITs. 

Pros of REITs

 

Upfront Investment:

With REITs, there is a certain sum you have to pay upfront, which goes towards the upkeep and maintenance issues of the purchased property. This is also known as a passive investment. This is highly preferred by investors because it garners capital without having to do much.

  • Liquidy: Easily sell or buy your property shares at any given time.
  • Minimum Experience: REITs provide you with capital. This is good because you don’t need experience in managing the purchased property. 
  • Low Investment: REITs are usually low upfront. Moreover, publicly-traded and non-traded REITs have the lowest investment cost. 

Pros of Owning a Rental Property

Unlike REITs, you have to take a more hands-on role in having ownership of your rental property investments. On the bright side, this can give you handsome financial gain in the long run. Due to the fact that you own a certain property, it enables you to take benefits from taxes, and get instant ROIs. 

  • Increased Equity
  • Reliable Income
  • Tax Deductions
  • Retain Control

Weighing Your Options

To sum this up real estate can result in bringing you a passive income and take you closer to attaining your financial goals. In order to understand which of the above investment avenues is beneficial for maximizing your return future, consider the mentioned factors in this article. If you’re someone that prefers to lay low, REITs are the perfect way to go without all the trouble. Or if you are considering owning a rental property, REITs give you access to various sectors such as commercial and hospitality. 

REITs vs Rental Properties Which Is Right For You

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