I'd like to hear what people think about REIT ETFs to invest in real-estate more indirectly. Do they bring most of the same potential returns as owning a building yourself, with the added benefit of diversification, or are they a completely separate thing?
What if that million was invested in a low cost REIT index?
They've unsurprisingly been hammered over the last year or so. In the long run investing in focused REITs (like apartment rental, etc.) will give you similar exposure to investing in their target market yourself.
Of course, you pay the standard laziness premium. The REIT takes a fee, and sometimes their incentives are not aligned with yours. Perhaps they have $x they are incentivized to invest, forcing them to buy and run properties without top-tier ROIs and you, with a tiny fraction of $x, could do better. Perhaps you could just flat out do better than them by knowing your market and running your properties better.
But REITs are probably not a great way to go as a solo investment. Most that I've found have underperformed the S&P 500 over the last decade. I'd use them more to hedge though as we've seen recently, it's entirely possible for both the stock market and the real estate one to nosedive together.
They are indexes (REIT) and funds (ETF) so you get diversification at the loss of control. Kind of like buying an S&P Index or investing in a mutual fund as opposed to investing in specific company stocks.
An REIT is a Real Estate Investment Trust. Not an index.
I have a small investment in an REIT and while the trust owns multiple properties, it is far from an index. An REIT is more like buying an individual stock, you are investing in a company that will use your money to purchase, improve, and maintain real estate in exchange for a share of the company. (That may not be technically accurate, but it is essentially what is going on)
What if that million was invested in a low cost REIT index?