Which is the better investment move to make in today’s market, REITs or directly flipping San Diego houses?
Publicly traded REITs have ballooned in popularity over the last year and a half, as many financial analysts recommend diversifying your portfolio with them. However, do they really compete with direct investments or flipping San Diego houses?
As the Flip This House team from San Diego has predicted for some time, publicly traded REITs have recently revealed their incredibly volatile side. REITs can be great for generating passive income and tax advantages, but few investors realize what their downside can be.
According to the Bloomberg REIT Index, the sector recently lost over 7% in a relatively short period of time. Fears of a coming rise in interest rates sparked the exit, catching many holding the stocks off guard.
Unfortunately for those losing their money in these vehicles, their performance is not tied to what is going on in the housing market. On the street level, U.S. housing is just beginning to pick up and rising rates will actually help by encouraging more mortgage lending and fueling the economy with more dollars. However, just like any other stock, publicly traded REITs can lose a ton of value overnight when inexperienced investors panic and sell.
This is, of course, why savvier investors tend to diversify by holding direct investments in real estate. Doing so allows them to prevent all of their savings being hit at once when the stock market goes haywire.
Private REITs can still be a good bet and don’t suffer from this volatility. Private REITs get even better if you are the one running them. Buying long term hold rental properties can also be a good move in the current market, given cash flow spreads.
However, those that are even more cautious and that truly want to glean as much as they can from current attractive market conditions are banking on flipping San Diego houses.
San Diego has become recognized as one of the healthiest markets in 2013, with declining foreclosures, rising home values and plenty of demand. This is enabling real estate investors to cash in fast by acquiring distressed properties from motivated sellers.
