If you have been looking at several ways to invest your money, you will have definitely come across REITs. A REIT basically allows you to buy shares of companies that own valuable properties which produce a steady income, like hotels and luxury suites. Thus, you are investing your money and getting returns through the vehicle that is the company operating and maintaining that particular property.Of course, you should also be familiar with direct investment opportunities in the real estate market. In fact, you may have already be involved in some kind of investment project of your own, and you only came across REITs because you were searching for alternatives to what you were already doing. So which one is the better deal for you? REIT or direct investment in the real estate market?
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Due to multiple reasons, we can’t really give a definite answer to this question. The reason for this is that the two concepts operate in very different ways. With a conventional real estate investment, you are directly investing your money into whatever property you have chosen, which means that you are the direct owner. On the other hand, REIT works in a way that you are an indirect owner: you are actually buying shares of the company who operates the property, which means that the company still remains fully in control. In turn for your contribution, you are getting money as dividends, but this is different from claiming full ownership.
When it comes to direct real estate ownership, there are certain advantages that can swing you to opt for this option. One is the fact that it allows you to have greater leverage, thus allowing you to use loans in order to get opportunities to invest in more properties. You will also get better tax returns, as you are able to directly control your taxable income by deducting depreciation and operating costs. Having full control of the real estate you invested in is also enough for people to consider this option to be much better than a Australian real estate investment trust.
Of course, there are advantages for opting to invest in a REIT as well compared to direct investment opportunities. For example, REIT allows you to start investing without having to spend six or seven-figure sums that are required to buy property of your own. The fact that REIT investments work similar to stocks also means that you are going to enjoy much better asset liquidity, allowing you much more flexibility with your investment portfolio. As long as you choose a good REIT like M&L hospitality trust, you can expect to grow your investment portfolio quite quickly without even investing a lot of your own savings at once.
By reading the above points, you can now come to a conclusion yourself. It doesn’t matter what you choose in the end: what does is the fact that you are truly happy with your decision, and that you won’t have regrets about it in future.