REITs Vs. Private Equity Funds: What's The Best Way To Invest In Real Estate?

Jun. 01, 2019 10:00 AM ETIYR, RESI-OLD, SPY, UNIT, VNQ, WPGGQ29 Comments


  • Everybody knows that they should invest in real estate; but most investors do not know what is the best approach.
  • Put simply, the best approach should provide the highest level of return for each unit of risk.
  • Numbers don’t lie: REITs provide higher rates of return and are less risky than Private Equity Funds.
  • We present how we put the favorable math of REIT investing "on steroids" by following a Value strategy.
  • Looking for a portfolio of ideas like this one? Members of High Yield Landlord get exclusive access to our model portfolio. Start your free trial today »

Most investors understand that they should invest in real estate whether it is for:

  • High current income.
  • Long-term appreciation.
  • Inflation protection.
  • Diversification.

Income-producing real estate has historically generated high rates of return with lesser risk than most stocks and provided valuable diversification benefits. It is often recommended to invest up to 25-30% of one's portfolio into real estate, and this is well-justified, in our opinion.

Over the past 20 years, real estate outperformed literally every other investment asset class:

REITs outperform all other sectors

The more difficult question to answer is HOW to invest in real estate?

Most investors are not experts in real estate investing and do not have the time or interest to do all the work themselves. Therefore, the most common options are the following:

Option 1: Invest in publicly-traded REITs.

Option 2: Invest in a private equity real estate fund.

We think that this article can help you decide which one is the better option. For us, there's no doubt: REITs are far superior.

And, we do not say this lightly. I have myself a background in private equity real estate and once thought that there was no better way. The truth is that I was investing in private real estate because I did not know better and suffered from many misconceptions on REIT investing. Today, I have turned my back to private equity, and my real estate portfolio is (almost) fully invested in REITs.

Here are the three main reasons why:

Reason #1: REITs Produce Higher Total Returns

Private equity real estate funds are commonly sold on the premise that investors can achieve higher returns than available in the public market. By investing in an illiquid market, investors are supposedly getting compensated for the higher risk of their investment. At least, you would hope so.

Yet, when we look at

ChartData by YCharts

This is not, however, possible for everyone. I do this full time, it's my only focus, I have great resources, and access to management teams to conduct interviews. I spend 1000s of hours and well over $20,000 per year researching the market to identify the best ~20 opportunities in a universe of over 200 REIT opportunities.

The objective of High Yield Landlord is to streamline this research process and allow interested members to emulate our strategy at a tiny fraction of the cost.

We are already +500 members. Join us today and Save $100!


This article was written by

Jussi Askola profile picture
Become a “Passive Landlord” with our 8% Yielding Real Estate Portfolio.

Jussi Askola is a former private equity real estate investor with experience working for a +$250 million investment firm in Dallas, Texas; and performing property acquisition in Germany. Today, he is the author of "High Yield Landlord” - the #1 ranked real estate service on Seeking Alpha. Join us for a 2-week free trial and get access to all my highest conviction investment ideas. Click here to learn more! 

Jussi is also the President of Leonberg Capital - a value-oriented investment boutique specializing in mispriced real estate securities often trading at high discounts to NAV and excessive yields. In addition to having passed all CFA exams, Jussi holds a BSc in Real Estate Finance from University Nürtingen-Geislingen (Germany) and a BSc in Property Management from University of South Wales (UK). He has authored award-winning academic papers on REIT investing, been featured on numerous financial media outlets, has over 50,000 followers on SeekingAlpha, and built relationships with many top REIT executives.

DISCLAIMER: Jussi Askola is not a Registered Investment Advisor or Financial Planner. The information in his articles and his comments on or elsewhere is provided for information purposes only. Do your own research or seek the advice of a qualified professional. You are responsible for your own investment decisions. High Yield Landlord is managed by Leonberg Capital.

Disclosure: I am/we are long RESI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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