Newsletter 65: REITs vs. Rentals — Which Will Make You Richer?
💰 The battle of passive income models: real estate stocks vs. real real estate.
Back when I first thought about investing in property, I imagined those TikToks with people collecting keys, sipping wine by the pool, and saying things like “my tenants paid for this.”
But here’s what most of those clips don’t show:
- Fixing a burst pipe at 2AM
- Watching your cash flow disappear into renovations
- And the stress of managing difficult tenants
So before you go house-hunting… let’s talk about a different way to earn from real estate — one that doesn’t involve cleaning up after someone else's dog.
🧰 Effort Level: What’s Actually Involved?
| REITs | Rental Property |
|---|---|
| Buy shares online in minutes | Search, inspect, and negotiate a property |
| No tenants, no repairs, no late-night calls | You’re the landlord — expect broken ACs and plumber drama |
| Truly passive | Hands-on management or costly outsourcing |
🔧 Verdict: REITs win for busy folks and hands-off investors. I’ve tried both, and I sleep better with REITs.
📈 Returns: What’s the Payoff?
- REITs historically return 8–12% annually — with no loans, no maintenance.
- Rental properties can outperform if you:
- Buy at the right price
- Manage costs tightly
- Get good tenants
But the learning curve is real. And a single bad tenant can wipe out months of profits.
💸 Liquidity & Flexibility
REITs trade like stocks — one click in, one click out.
Selling a rental? Think weeks, not minutes. Plus agent fees, legal costs, and sometimes a little prayer.
⚠️ Risk Profile
- REITs face market swings and rate shifts — but you can spread risk across malls, data centers, even hospitals.
- Rentals are hyper-local. A downturn in your area? You’re stuck holding the keys.
🧠 Final Takeaway
REITs and rental properties both build wealth — but in different ways.
🏡 Rentals can be powerful with the right property and time. But they come with higher effort, less liquidity, and more surprises.
📊 REITs offer diversification, simplicity, and speed, making them a strong option for beginners, busy professionals, or anyone who wants real estate exposure — without being a landlord.
✉️ Want more no-fluff breakdowns like this?
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— Mindy
Founder, Hedgehog Huddle
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