Investing in a rental property is not something I am interested in. My husband and I considered buying a vacation rental in the past. But visiting the homes and talking with property managers convinced me I don't want to be a landlord in any capacity -- whether that's renting out a vacation home, purchasing multifamily properties and looking for tenants, or buying commercial space to lease.
The good news is, I can still gain exposure to real estate, including rental properties, without having to deal with the hassle of owning them directly. I've found that a different approach to making real estate investments would be a much better option for me.
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REITs are a far better approach for many
Rather than buying a rental property that would require hands-on effort, I prefer a simpler approach: investing in real estate investment trusts, or REITs.
REITs are companies that own, operate, or finance real estate investments. They generally pool investor funds to buy properties or to finance the purchase of them. Investors benefit from this indirect ownership without having to take on the personal responsibility of having properties of their own.
You can buy REITs that make many different types of real estate investments, including trusts focused on acquiring multifamily rentals, nursing homes, or commercial properties. And you don't have to do the legwork of finding an apartment or duplex to purchase, marketing it to tenants, collecting rent, and responding to complaints. You don't even have to hire a property manager.
You can just research different REITs and find one that is invested in the type of real estate you're interested in -- one with a solid track record of paying dividends and appreciating in value. You can buy and sell REITs easily with limited cash, and your time spent investing is minimal. Perhaps best of all, you reduce your risk since each REIT typically owns many different properties.
Is owning a REIT right for you?
I personally prefer a REIT rather than buying rental property, That's not the best choice for everyone; some would prefer consistent rental income from a tenant rather than earning regular dividends from a REIT. And some people enjoy finding a physical property at a good price and then renting it out to others.
Ultimately, you need to think about the risk you're willing to take, your goals for the investment, the time you can devote to it, and your level of knowledge. If you'd prefer an easy investment that doesn't require you to make a down payment, borrow money, find a property, and manage it (or hire someone to), a REIT could very well be the best choice for you, too.
