Potentials of Real Estate Investment : Single Family REITs vs. Direct Property Ownership
Shepard, Mason S., 1991-2016
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Real estate is an underutilized asset in the investment world. Investors are always looking for an advantage to make more money. Within this paper real estate investment in the form of REITs and direct property ownership arc analyzed and shown their usefulness. The way each work and profit margins of both contribute to the profit that can be made in real estate. Investing in real estate can be a good contribution to an investment portfolio and a sound investment on its own. The analysis will show a comparison of six single family rental properties to three single family home REITs. The same amount of capital used for each of the homes will be used how much return can be made from each of the three REITs. The comparison will use each individual rental property and compare that to each REIT. The prices at which the REITs will be bought and sold arc all based on real market values. The comparison will also take into account the dividends paid for each REIT. The rate of return of each, rental properties and REITs, will be compared. A case study was done to further the analysis. For the case study, a single family home was purchased, renovated, and sold. The amount of capital used for the purchase and renovation of the home is the amount used to compare each of the REITs. Because of the shorter time span that this case study was completed, the terms of how long the REITs were held will also be the same. The rate of return for the REITs and the home renovations will be compared.