1. Investing in Real Estate through
Shares versus Direct Ownership
By Ehsan Bayat

2. Introduction
• For individuals looking to invest in real estate, one
option involves purchasing shares in a real estate
investment trust, or REIT. This is similar to buying
stocks or mutual funds, since it entails investing in a real
estate portfolio rather than a particular property. Before
making this type of investment, individuals must
complete a great deal of homework and make sure they
understand how managers plan to extract value from
portfolio properties. The performance of an REIT relies
on both cash flow and gains from selling or renting
property. Shares in a REIT can complement more
traditional stock and bond investments, since a
completely different market drives their performance.

3. Direct Ownership
• Direct ownership involves a much more active approach,
as landlords maintain financial responsibility for repairs
on a property. Before making a purchase, an investor
should hire an appraiser to learn about hidden defects
that could hinder cash flow. Purchasing a rental property
is not akin to buying a home. With rentals, investors
must comply with fair housing rental regulations,
insurance requirements, and building codes. When
calculating the potential value of direct ownership,
individuals should always use modest rental prices.
While the market is currently high, rental prices can
fluctuate a great deal as new and cheaper properties
become available in a given market.