Why I'd rather buy WP Carey or Realty Income than real estate

A property? No, I prefer to stick to REITs like this W. P. Carey (WKN: A1J5SB) and Real estate income (WKN: 899744). The investment options are basically very similar: it involves passive income from real estate. And secondly, to benefit in the long term from the concrete rise in gold prices and thus protect yourself against inflation.

So far, so good. Nonetheless, there are many different advantages that, in my opinion, speak in favor of REITs. Let’s look at this more closely. I don’t want to give you the benefit of the doubt if you’re a fan of concrete gold. But I encourage you to at least take a closer look at the possible pros and cons.

WP Carey, Realty Income & Co.: More divisible than real estate

A primary reason I prefer to rely on WP Carey or Realty Income alongside other REITs is their divisible and scalable nature. Or, to put it another way: I can buy a share of Realty Income for less than 50 euros at the time of writing this article. At WP Carey, it’s a little over 55 euros. This means: I don’t need to spend a gigantic fortune to invest in concrete gold here.

Of course: the returns are similar. At WP Carey, I receive approximately $0.86 per quarter in dividends. Whereas at Realty Income, it’s $0.2656 per month. This is certainly not rental income that we can expect as an income investor. But the bottom line is this: I can invest 1,000 euros. Or even 100,000 euros if I wish. Or any other amount that comes to mind.

These REITs are more flexible. We can invest larger or smaller amounts. Yes, in principle, you can even buy our shares at any time without additional purchase costs. And at the same time, over several years or even decades, we can gradually build a position that also provides us with a growing passive income or dividend.

The risk of consolidation is lower

To be honest, it’s just as possible that we could make a mistake when investing in property or when investing in a REIT. We certainly don’t have to be unlucky when it comes to tenants. Or damage to the house or apartment. But it is possible that we may have difficulties with owners on an individual property. Or more serious damage. Even a vacant property can significantly reduce our rental income.

REITs like Realty Income and WP Carey are just one stock. This means: We have an individual risk based on the respective stock (which should definitely be kept in mind!). But both REITs are excellent examples of highly diversified real estate portfolios. Realty Income has over 13,000 properties. While WP Carey has a four-digit unit count. By purchasing a stock, we secure a share of this total portfolio. A single tenant, a single vacancy or even a disaster? All this gets lost in a colorful and larger portfolio.

In this regard, I am convinced that in direct comparison with real estate, a REIT like Realty Income and WP Carey can provide calmer and more reliable results. It’s usually internal diversification that drives this.

Realty Income, WP Carey vs. Real Estate: Lots of Little Things

Last but not least, there are a lot of little things that, to me, speak more to Realty Income or WP Carey than to real estate. For example, effort: Buying and renting real estate directly involves effort. We have to take care of administration and taxation. In the case of a REIT, however, the property company takes care of this; you just need to take care of the proper taxation of capital gains (which the broker often takes care of).

At the same time, additional purchase costs are lower. Only trading fees with a broker are due. Buying a property, on the other hand, involves an additional purchase fee of 10% or more. We must also remember that finding and evaluating a property is more complex and that the offer is often limited. However, we can purchase Realty Income or WP Carey at any time at market price and acquire the same combination of existing properties. Listing on the stock exchange also allows more liquidity in the event of a sale. Whether we should buy and sell at any time is of course another question.

But overall, I see for myself: REITs like Realty Income and WP Carey offer me more flexibility, more scalability and also more diversification. The possible disadvantages are of course that I am not registered in the land register, that I do not have much operational power (for example regarding the use of borrowed funds) and that I have to put up with the volatility of the action. price. However, I think the pros outweigh the cons.

Just 1,000 euros per month despite decades of work: that’s all the legal pension can offer many of us.
The good news is that you can avoid this unpleasant surprise in retirement! In our free special report, Aktienwelt360 analyst Vincent Uhr describes in detail the ten cornerstones of successful retirement planning for young and old. Get the report now and find out what you can do now to get the most out of your retirement!

Leave a Comment