Buying Real Estate vs REIT

[jcc]

Especially if you're capable of doing remodelling work yourself, and have the spare time to manage the place, I think it's fair to expect on average to make significantly better returns than a REIT. . .

By how much though?plus 3%-6% . Am really curious how much more the pay off is. A management company charges around 5% of rent to manage it. I don't think I have the appetite to be hands on for just a single digit benefit. If its in the 15% up, then it could be something I'd be interested in.

Depend on the amount of work you put into it? I'm sure if you invest in materials and do remodeling yourself, you can push double digit percentile increases in rent, the question then becomes how much is your time worth?

Can you do an equal job to professionals in identifying sketchy tenants and keeping the place occupied? If you can, you save on all their fees at the cost of your time. If you can't you lose out on rent income.

Most of the people that do this well make it into a serious side job. There's no free lunch

[crew]

I think the Management company won't handle remodelling, reform stuff either. So this would still be an expense/time even if I engage a Management Company. But yeah, I guess doing enough so that you can earn in double digits will already cross into the realm of a full time job, defeating the purpose of a passive income!

[RetireJapan]

I think the Management company won't handle remodelling, reform stuff either. So this would still be an expense/time even if I engage a Management Company. But yeah, I guess doing enough so that you can earn in double digits will already cross into the realm of a full time job, defeating the purpose of a passive income!

We rent classrooms and teacher apartments from a management company (Pitat House) and they seem to do all the maintenance, renovations, etc. (subject to landlord signing off on it).

[jcc]

I think the Management company won't handle remodelling, reform stuff either. So this would still be an expense/time even if I engage a Management Company. But yeah, I guess doing enough so that you can earn in double digits will already cross into the realm of a full time job, defeating the purpose of a passive income!

Most things in life you can pay someone to do it for you, and it'll obviously take a significant cut of your profits for getting it done

[StockBeard]

I've been following the blog of a Japanese guy that recently FIREd. A large portion of his income comes from REIT dividends. He has quite a few posts where he goes into detail about their pros and cons, worth a read if you can read Japanese. He doesn't use much technical jargon so it's quite easy to follow even if you're conversational.

https://zz597.blogspot.com/

Thanks. Google translate gives me a good feel of the content without having to try and read by myself (so lazy!). Great to see that the "early retirement" trend also exists in Japan, will definitely follow this blog!

[crew]

While we are (sort of) in the topic, does anyone know general construction costs to develop raw land per sqm? Prefab structure perhaps?

[mighty58]

The ability to leverage on actual real estate is the obvious difference between the two, but being leveraged can exacerbate the downside risks inherent there in Japan, where the margins are pretty thin to begin with, and real estate does not (in general) appreciate in value.

Especially if you're doing research into the subject from a Western perspective, this skews the equation a fair bit, because the primary assumption that hard work and care put into a property will raise its value doesn't necessarily work here. Any money/work you put into sprucing up a place in Japan will be to primarily raise the attractiveness in the rental market, not the actual selling value. As such, when you're looking to exit, you're more than likely looking at a drop in valuation.

You can mitigate against this somewhat by selecting grade A locations, but the initial buy-in costs of those kinds of places are higher to begin with.

Overall, actual real estate in Japan seems like a higher risk play, but without the corresponding hope of potential high return.

[captainspoke]

What do REITs in Japan pay? (dividends)

The typical equity REIT in the US (VNQ, IYR, XLRE) pays about 3%, (closer to 4% for VNQ), tho SRET pays about 8%. For equity REITs, some focus on healthcare properties (HCN, WELL), or residential or commercial properties, some got stuck holding malls (the death of retail), and there are other niches to choose, besides capturing the overall market. (And as with vanguard's VYM and VYMI, VNQ has VNQI at 4%.

Mortgage REITs (eg, NLY) pay even more, but with their own special risk factors--as with bonds, rising interest rates lead to falling share prices. Some ETFs, such as MORT or REM, assemble a collection of these individual REITS, and still pay a good dividend.

[crew]

What do REITs in Japan pay? (dividends)

Highest right now is around 6%, but most are within the 3% rate. You can see a ranking herehttp://en.japan-reit.com/list/rimawari/

[captainspoke]

What do REITs in Japan pay? (dividends)

Highest right now is around 6%, but most are within the 3% rate. You can see a ranking herehttp://en.japan-reit.com/list/rimawari/

Got to that by taking the en. off the beginning. Didn't want to load the english version, even via the japanese version of the site.

Regardless, thanks for the link--something to explore when I get some time.