Ever hear of a REIT investing? No? That’s ok, me neither. So we’re going to learn together what that is and if we should collect, them, buy them? I don’t know yet.
A REIT is a real estate investment trust. It’s a good investment and more importantly, it’s a good investment for those who want to buy property but for whom that would be a mistake.
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There are two kinds of REIT, an equity and a mortgage-style. About 90% are the first type and the remaining 10% the second. If we’re learned nothing from 2008 and most of Congress hasn’t, it’s to stay away from mortgage stuff.
The max the holder of the REIT can take is 10% of the revenue. That means the other 90% are passed on to the investors.
Andrew compared a traditional Vanguard fund and a REIT Vanguard fund. The traditional had a 12.56% return and the REIT had a 30.29% return! We advocate renting over buying a home for young people for a variety of reasons so a REIT is a way to have your cake and eat it too.
A REIT would be a good place to stash your emergency fund. And remember, you should not be having emergencies a few times a year. Needing a big ass TV is not an emergency.
If you’re a young person interested in buying a house for the investment but may move within the next few years or just don’t have the time to deal with all of the issues that arise with owning a home, a REIT is a good compromise for you.
Boulder Beer Hazed and Infused: An American pale ale.
Vanguard: The REIT Index Fund.
Mint: The easy way to track your money.