Why Own Investment Property -- Ownership Comparisons
A real estate investor has several options for acquiring and owning income property. The table below summarizes several options and their comparative features.
| Ownership Options | |||
|
Feature |
REIT |
Self Managed Direct Ownership or Partnership (GP, LP) |
Direct Ownership With RBS InvestorCare© |
|
Financial Return |
Depends upon share price. |
Depends upon property selection and management capability. |
9+% (all cash purchase) 12+% (25% down payment) |
|
Personal Effort |
Low. Monitor share price and REIT performance. |
Possibly very high. |
Low. Monthly payments deposited automatically. |
|
Property Selection |
No control. Investor takes what the REIT owns. |
High control and significant effort in selection. |
High control, but limited effort as RBS pre-screens the properties to fit the InvestorCare© profile. |
|
Depreciation Capture |
Not possible. All depreciation flows to the REIT. |
Possible. For partnerships, depends upon the agreement. |
Investor captures 100% of depreciation. |
|
Capital Gains |
No control. REIT controls any capital gains. |
Possible. For partnerships, depends upon the agreement. |
Investor has total control. Capital gains deferred until sale. RBS can help the investor execute a 1031 exchange, deferring capital gains for years. |
|
Financial Market Risk |
High. In the past market crash, REITs suffered the full market drop. |
Limited. For partnerships, depends upon the agreement. |
None. Investor owns the property directly, so no financial market risk. With RBS InvestorCare©, investor has positive cash flow, so no pressure to sell in a down market. |
|
Liquidity |
High. Shares are traded daily. |
Limited. For partnerships, depends upon the agreement. |
Limited. Real estate is not a liquid asset. |
|
Tax Deferred Exchange |
Not possible. |
Possible, but difficult. |
Possible. With RBS InvestorCare© the investor has significant opportunities for both “legs” of the exchange. |
As the chart shows, each option for ownership of income property has its own specific profile of features and limitations. The investor should choose the option that best fits his or her own personal profile, considering time available for the investment, knowledge, and appetite for risk/reward.