I stopped buying rental properties as I learned more about real estate investment trusts, or REITs, which are publicly listed real estate investment vehicles. Well, first of all, it is important to correct a few misconceptions:Misconception #1: Rental properties are more rewarding because of leverage - WRONG. They could use a 1031 exchange, but that forces them to remain invested in real estate even if real estate becomes overpriced. But rental property investors put their personal liability on the line and this explains why plenty of rental property investors file for bankruptcy protection each year, but no REIT investor has ever lost money in the long run if he/she held a diversified portfolio. Rental property investors typically suffer many misconceptions about REITs and this leads to biased decision-making when favoring rentals over REITs.
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