Edit: I suppose one reason would be if you want to rent, but you like a house that's not on the rental market. Any others?

That throws the calculation way off, because you don't get the tax benefits associated with buying and living in a house.

In general, asking “why not X instead of Y” without giving reasons why X is preferable over Y is just a waste of everyone’s time.

You will have a commission in the expense ratio indefinitely.

But yes, definitely a decent option if you want to put your money in real estate with less headache.

1. Taxes - There are tax breaks to owning 2. Property Management - For an REIT you pay a property manager. If you own, no need to manage your property. Free +1.2% return on asset! 3. Loans are heavily subsidized by the government, REITs cannot get 30 year loans at 3-4% interest. 4. Occupancy - You live here. Occupancy rate 100% so take an +.6% to returns!

If the government stopped 1 and 3, technology completely automated 2, and leases were 4 years long. Then no one would recommend buying your own house as an investment.

But the post does seem extremely naive. What it costs to maintain real estate (property tax, maintenance, insurance, etc) makes even typically criminally-high mutual fund fees seem reasonable. Even if owning real estate really floats your boat why wait in fear for the next 2am call to fix a flooded basement when you can get a check every month from a REIT which being a dividend is taxed at less than half the rate of a rent income (which will likely be taxed at your highest marginal rate)?

- Other people's money (leverage via loan)

- Tax write-offs (interest deduction, expense shelter, depreciation).

- Appreciation.

- Equity growth.

- Rental income.

The first two probably can't be obtained via REIT.

But, more fun math:

Stocks don't have maintenance costs like houses/rental units. The property tax alone per year on a ~$500k place is ~$8k. (You'd need to get $700/month in rent JUST to cover property tax.) (The next buyer, at 1.4M valuation, would need to charge ~$2k/month JUST to cover the prop tax, nothing else!)

Add in ~$2k/year in regular maintenance, + ~$30k of maintenance every ~5-10 years (roofs, flooring, bathroom fixtures, appliances all die someday), and renting not so profitable. Reliable capital appreciation is the bigger, pure profit here.

With REITs, there is typically no leverage and the dividends are taxed as ordinary income. If you invest in real estate directly, you can borrow at low rates and the tax treatment is better through deductions, depreciation, 1031 exchange, etc.

(Traditional) REITs are priced more or less like a bond by the markets and will be largely evaluated based on their yield. As a result, you're missing out on the appreciation component of real estate. You also don't get the tax benefits of the interest deduction. With a direct investment, you can look at things like which areas will disproportionately appreciate in the future. It's more like an active investment in a value stock with a nice dividend to boot.

Of course if you have an investment portfolio adding an RETI is probably a good idea, but it's not really comparable to investing in actual real estate.

For instance, buy an index with a low maintenance fee that tracks the REIT. It's also a lot quicker (and easier) to get out of that index fund than it is to get out of your home. https://personal.vanguard.com/us/FundsSnapshot?FundId=0123&#...

The key is, you can invest in real estate without owning a home and better still: be diversified into multiple kinds of real estate. A home is a very homogeneous investment vehicle. Think of it more like a savings account with a maintenance fee but you can live inside it.

I have a few rental properties, all managed by a property management co.

I can cash out re-fi and roll it into another property tax free, rinse and repeat. Buy > Rehab > Rent > Refinance > Repeat.

I can take the property and sell if it appreciates.

I can do a 1031 tax exchange for a similar property.

Or I can just continue to rent it out.

Best part is I can use other people's money as leverage to buy much more property, and if the deal makes sense at the time of purchase/deal analysis, I won't be over-leveraged and will stand to make money, with multiple exits as options.

After paying off the note, I can seller finance it to someone (rent-to-own) if I wish, at whatever interest rate I/my buyer deems appropriate.

Can't do that with REITs, unfortunately. But in terms of being truly passive, REITs fit the bill!

I suppose that some of the big benefits of home ownership (mortgage interest/local tax deduction, capital gains exemption) are not available with Arrived?

These benefits are not available with REITs, and REITs have to pay out most of their earnings as dividends.

Is Arrived classified as a REIT?

I have also invested in vehicles (private offerings) that fund residential construction especially in housing constrained markets. Very nice reliable returns