If you buy REITs in your Roth IRA you can avoid the dividends being taxed. You can keep reinvesting the dividends into more shares over the years and then have a tax-free stream of dividend income after 59 1/2.
i'm not in it for retirement, i'm in for now or the near future. Brandon I still have unfinished plans. It makes me angry when family and friends want to put my life in a box. They can put it in their roth IRA if they want to, but I have bigger plans. When people think I will be happy as an empty nester, ha! They don't even have a clue. The truth is, I'm investing so I can leave this forsaken area that I live in. I want out. I'm leaving fr better pastures. OLD Age? Retirment! HA! I dn't care about those things because when I'm an old man I won't even be able to enjoy it.
@@pluto4847 Can’t argue with that logic as I feel similarly about the whole 50+ / 60+ age before you can touch these funds without massive penalties. I too don’t wanna wait until that time to have access to the funds etc. Although I get the idea behind putting REIT’s in Roth’s IRA. The cool thing is that we have the choice either way 🙂
@@dustywilson5461 That was what I was thinking, Dusty. Have some put away in an investment account for "later/rainy day/"retirement age"/family trust/whatever you want to call it or want it to be & have the rest of your investment accessible for now. So, that part...the access now... I will have to figure out how to go about doing.
100% Love Reits. Please have this man on more often. Im a part time realtor. Who loves the passive income method. But I know Im lazy. And I love my free time.
I'm planning on investing in REITs, but this guy just doesn't seem to know his numbers. Yes, they are a good investment over time but he seems to be pushing REITs that he personally invests in and doesn't even quote correct numbers.
This was really good and honest. On other podcasts there are people who say they got rich on real estate and retired in their 30s. They don’t tell the full story and perhaps how they really got rich (selling memberships in real estate education programs).
Vanguard REIT Index....buy and never sell. 3 percent yield. Goes up about 7 percent a year so it doubles in 10 years. 3,6,12,24,48% Those are you yields with the double. Buy and hold...you can't lose!
Contrary to some RE investors/influencers who are full blown anti-market and talk about it all over social, I love hearing Henry talks about his portfolio, how he's learning about the stock market and invests. Real investor learns about opportunities to make more more and doesn't shut-down to other alternatives.
The real benefit of a REIT is that you can panic sell in 2 seconds. If you need to unload a property, it's a huge fucking process and it takes months. The REIT also spreads risk of bad tenants over thousands of units. If you have 1 rental house, just 1 deadbeat tenant can fuck that investment into the ground.
Let's not forget that when rental situations do get bad, you are dealing with evictions and lawsuits (offense and defense). Those can cause a lot of stress. Been there done that. Trying to diversify into REITs now.
The downside is dividend based stocks / REITs are that they rarely increase in value dramatically as the value is paid out through dividends. Most dividend stocks pay out 2-5% annually without shifting in price much. Most investors would make more money with traditional stocks, or buying real estate (which has cash flow plus appreciation) over REITs.
I would disagree with you on that point. I invested in stocks and REITs a few years ago and can categorically tell you that the REITs outperformed stocks every time. Also why are REITs being discussed now just before a crash in house prices which means a lot of landlords will be selling their properties to avoid negative equity? Isn't that a bit dishonest?
His complaints about owning real-estate can simply be solved by hiring a property manager and providing them with a maintence limit. A landlord shouldn't be buying stuff for tenants and getting calls at 2am. Just have a PM do it for you. Paying a PM is worth every penny, so long as it financially makes sense to do so.
Maybe I'm lucky, but have owned dozens of properties for years and never got a 2am call, nor one on the weekend. Have good customer service, set expectations with tenants then sit back and count your cash.
Reits and stocks are great for the already wealthy. But real estate is the only option for people with a dead end job trying to get out of poverty. Save up 30k and put that into ownership of a small multi family. This one change can transform your life… live for free and increase your net worth dramatically giving you cash flow, equity, and the ability to get loans and expand your opportunities that are not available to people with a normal income due to your assets
I don't get your point. Why you wouldn't invest this $30k into REITs and get 12% -15% return, counting the dividends as well? Let's see how are you going to get that return on your rental property while working a full time job.
@@AleksandarPopivoda because if you are starting out and not wealthy you are paying most of your income to surviving and paying someone else’s mortgage via renting. I live in California and it is not uncommon for people to pay more than a mortgage in rent because the price to buy is high and banks are strict and you can’t qualify for the mortgage but you can convince a landlord in a bad Neighborhood to take a chance on you. This was my story spending 60% of my income on rent and trying to run a small business starting with no family wealth and $5,000 in net worth. If you can get the multi family and now live in an income generating property you will have 20-60% more to of your same income invest by not paying or at least reducing your rent/mortgage… what you invest in is an appreciating asset that is taxed as a depreciated asset and your mortgage is being paid by other peoples work. over a 15 year period the equity from inflation of the assets and principle being paid down by others means that you are now triple the net worth of the same person that just invested 30k and still spends the bulk of their money on surviving, this gives the poor person the ability to get loans and leverage to do more business or acquire more properties. If your net worth is low banks will laugh at you when you try to start a business or buy a house you like. So This is transformative to a person without a wealthy family or high income earnings. not only did you potentially get a similar return as the person who invested in a reit but you removed your largest life expense and free yourself up to work less at your dead end job that will keep you poor. If you are in this situation you will not feel like it’s a pain to deal with managing a rental… it’s a blessing that makes you excited everyday(that’s how I was) This is transformative to the average income wage worker. Sure your 30k in a reit may have given you nice returns. But at the end of a 15 year period the rental property equity is likely 2-8 times more than the cash from the reit… your money from the reit is effected by inflation and you can do less with it. Perhaps by then the minimum downpayment on the same property is more than the money made by the reit ;)… that’s why I say if you have extra money to invest every year and live comfortably from your income sure invest in stocks and reits. But you are probably losing out big time compared to the person that transformed that 30k over the 15 years into a 30 unit investment portfolio.
This year I started investing in FUNDRISE, which is a kind of REIT. So far this year I am Doing 5,6% which by far less than what we do in our Rental Investments (15%-17%). But I like the idea of diversifying. I expect 8%-9% once marke stabilizes hopefuly in the next few months. Very good insights, thanks for this video👍 I will continue to study REITS👍
Best of luck with that, office space in general is not a popular investment ever since the pandemic. I personally wouldn't recommend it but who knows what will happen in the future, maybe it will be great in the long run.
Ive been trying to teach my family about the nuances of the stock market. I find that even some people that invest dont understand. Most people don't know that a 401k is simply a stock market instrument. They buy Stocks and Bonds. My family is all about Real Estate. They think the market is about gambling, not buying American Businesses. With this info you can use good REIT dividends to build and customize cashflow over time.
great podcast! I own both physical real estate as well as a nice portfolio of REITS. If you have a long term time horizon there are some great REITS currently on sale.
He should’ve used property management company Yeah it will cut into cash flow but you don’t get customer calls at night And need to do repairs (use handyman) yourself.
Myself I investing in intl coverage for reits and the snp 500 and vti and blue ships including JBHT stock divided with my Main income as over the road trucker and know how jb hunt started and I invest in technology like VGT and Apple growth stock also ScHD and physical gold and silver and Singapore airlines and Delta and some short mid and long term Bonds I look for steady overall income and growth sectors combos in a overall well balanced wealth growth with passive income
Love the show alot best ever you guys should do something on international investing and self employed fancing it would be different and a great opportunity for the podcast 😀 👍
@BiggerPockets. Q1. How goes one compute dividend payout ratio on a REIT. Q2. Are dividends treated as regular income such as options on stocks for taxes? Q3. How does one evaluate RIET such as ABR and OHI? Thanks!
From what I found out to your Q1 it will depend on the company you invest with, a REIT usually pays out 4-5% per year or quarterly, again depending on the company. Q2 - you get taxed since its income, unless you put it into a Roth IRA which is tax exempt, and your holdings from your dividends will just keep building over time. In my opinion REITS is a good long term strategy. Q3 not sure…👍
Q1: Computing Dividend Payout Ratio on a REIT The dividend payout ratio for a REIT is computed similarly to other companies, but with a focus on funds from operations (FFO) or adjusted funds from operations (AFFO) rather than just earnings. This is because FFO and AFFO provide a clearer picture of a REIT’s operational performance by adding depreciation and amortization back into earnings, among other adjustments. Here’s how you can compute it: Dividend Payout Ratio = (Annual Dividends per Share) / (FFO or AFFO per Share) This ratio measures the proportion of a REIT’s income paid out as dividends to shareholders. A payout ratio close to 1 (or 100%) indicates that the REIT is distributing most of its operational cash flow as dividends, which is common due to the legal requirement for REITs to distribute at least 90% of their taxable income as dividends. Q2: Treatment of Dividends for Taxes REIT dividends are typically taxed differently from qualified dividends from other stocks or options on stocks. There are three components to REIT dividends for tax purposes: 1. Ordinary Income: The largest portion of REIT dividends is usually taxed as ordinary income at your personal income tax rate. 2. Capital Gains: Part of the dividends may be treated as capital gains if the REIT sold assets at a profit. This portion would be taxed at the capital gains tax rate, which is generally lower than the ordinary income tax rate. 3. Return of Capital: Some of the dividend may also be a return of capital, which is not immediately taxed. Instead, it reduces your cost basis in the investment, potentially increasing the capital gains (or decreasing the capital losses) you realize when you sell the shares. Q3: Evaluating REITs like ABR (Arbor Realty Trust) and OHI (Omega Healthcare Investors) Evaluating REITs involves looking at several key metrics and factors: • Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO): These metrics offer insight into the REIT’s operating performance and its ability to sustain and grow dividends. • Dividend Yield and Payout Ratio: High yields are attractive, but very high payout ratios can signal that dividends might not be sustainable. • Debt-to-Equity Ratio: This indicates how much debt the REIT is using to finance its assets relative to equity. A high ratio may suggest higher risk. • Occupancy Rates and Lease Expiries: High occupancy rates and longer lease terms can indicate stable income. • Sector and Geographic Exposure: The performance of REITs also depends on the sectors (e.g., healthcare, residential) and geographies they invest in. Trends in these areas can affect property values and rental incomes. • Growth Opportunities: Expansion plans and the potential for property acquisitions or developments can drive future income growth. To evaluate specific REITs like ABR and OHI, you would examine their financial statements for these metrics, review their portfolio quality, and consider the broader market and economic trends affecting their sectors. Analyst reports and REIT-specific research can also provide valuable insights into these companies’ performance and prospects.
What I don't get is If the REITs your looking at haven't beat the returns of the S&P500 over the past 5-10 years - what would be the draw to investing in them? Simply for dividends?
I have several REITs, equity and mortgage types, and physical properties, (very happy with all of it) and those physical properties I have under management. I used to manage my own properties. I'll NEVER go back to doing that again. Too many hassles. It's worth the 10%, which I can claim on taxes, of course. I'll still keep acquiring properties, but I really love my REIT investments. A number of them pay monthly. At any rate, I believe I am on the right track for the long haul. Good show. 👍 Oh, and ARE REIT? At 2.85% yield? NO THANK YOU! AGNC and SACH are a few of the winners, amongst the many others I own, I'll have in my portfolio till the day I die! So you've built up this super portfolio that appreciated like crazy and it's just great! You've sacrificed, scrimped, and saved. Sweat equity on your properties and a cash-flowing dividend stock portfolio. Then you will it to your kids. They cash it all in and any trace of your hard work is gone within a few months! Like LOTTO winners! I am reinvesting everything while also buying the dips via dollar cost averaging.. Can't believe how fast my annual stock income is rising. And no, it's not all out of pocket. Great yields equal great returns. 👍
@@ericthornton5252 So? What's your point? Didn't you understand what I said? I'm doing just fine. No one has all the answers, so, if you aren't a billionaire, why should anyone listen to you? Millionaires are a dime a dozen.
REITs may have already priced in the anticipated real estate crash mostly given that they are traded in public markets whereas physical real estate is not yet priced and yet to crash.
@@lolasogm didn't realize they had fallen that far already. 🤔 If I weren't already allocating my cash flow into crypto and further high cash flow strategies I'd be loading up on REITs myself now. 😉
Invitation Homes (INVH) had a ATH of about $45 last December. It's at $39 now. In December of 2018 it was at ~$23. Buying now is NOT going to get you into 2017/2018 prices. Seems like a misleading statement unless I'm completely missing something here.
I think he means if the company had previously bought properties for lower prices in those years, you are buying into the company which got a good deal which it is still profiting from, basically. But over time IMO this could get priced in anyway so not sure how long this effect would last
Not to pleased with this one. I didn’t feel like Matt was being honest, I felt like he was simply pushing REITs which is his job. He didn’t say much that created a “light bulb” moment, he more or less just agreed with whatever the hosts said.
I have heard from a few sources when it comes to buying real estate properties you can only get 1 loan per year. What if I want to move faster then that? Is there anyway around doing this so I can create cash flows from more than one property faster?
@@graysongrzybowski943 Not true, meaning yes a person can get more than 1 loan per year. Maybe you are thinking of owner occupied loans- you have to live in the property for at least 1 year. But typically you can hold 10 conventional loans. I have read all of this from Brandon Turner’s book, can’t speak from experience as I don’t have 10 loans.
@@ACR4008 This is more helpful, Thanks! As I make my way toward investing I need to do something thats quick like these loans. Would you recommend Brandon Turner's book?
@@graysongrzybowski943 I would recommend his books. He is quite successful. I would also recommend listening to many BP podcasts. I caution you to avoid the thinking that becoming wealthy in real estate will be fast. I also caution you that loans from a bank are not quick, and that you should build your system/team like David Greene and Brandon Turner talk about. Otherwise you will buy the wrong property or sink your deal with poor management. Good luck.
Things are going to get much worse!!! you know all that food prices are going to go up against significantly because of the money that the farmers have actually had to extra spend from the price jumps and the gas jumps and did you forget about all these food warehouses that have been a mysteriously burnt to the ground..
@@mt-nv4jd this is not the only episode that's straying from building wealth through real estate. There is a trend. Prolly because neither of the hosts focus on long term rentals. That's been the heartbeat of bigger pockets, but has drastically evolved over time.
@@jarodfranklin1081 David Green cut his investing teeth on long term single family rentals. The fact that he is seeking out more efficient and hassle free methods of investing in RE simply means he has been so successful that single family properties don't fulfill the type of returns for his growth targets likely. If you aren't interested in alternatives to single family homes though you don't need to watch the episodes that cover other strategies.
Realy boring noting to show real life real estate all talk just like when u go out from college and you understand u just waste 4 yrs bc real business not like what they teach u! I want to see your pro folio and how u run the real estate
