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Why You Will Fail As A REIT Investor



  • REITs have averaged 14% per year during the past 20 years. Yet, most individual investors probably didn't earn half of that.
  • We discuss some of the most common mistakes that lead to disappointing returns when investing in REITs.
  • Some ideas of good opportunities and other REITs to avoid today.
  • Looking for a portfolio of ideas like this one? Members of High Yield Landlord get exclusive access to our model portfolio. Get started today »

REITs have been enormously lucrative investments over the past decades. They returned up to 14% per year and crushed all other sectors:

$100,000 invested at 14% per year for 20 years is worth $1.37 million today: a 13 times on your initial investment.

It's then no wonder that REITs are so popular. Unfortunately, all of this is nothing more than a mirage for most individual investors. I know many professional REIT investors that did even better than 14% per year, but I don’t know a single individual investor who has managed to earn 14% per year during the past 20 years.

They fail to earn these returns because they make repetitive mistakes that end up costing them a lot in the long run.

It has been over 10 years since I started on my journey as a REIT investor. I have seen and experienced many of these mistakes. I have lost money in the process, but most importantly, I have learnt from it.

In today’s article, I discuss the five most common reasons why investors fail when investing in REITs.

Mistake #1: Trader Mentality

REITs represent diversified portfolios of income-producing properties. They earn rent checks, month after month, and their fundamentals are fairly steady and predictable.

Therefore, most property owners are long-term oriented, focus on the income, and wait patiently for appreciation. They let their investments compound for many years, possibly decades to come and reap the compounded returns.

REIT investors are very different, but for the worse. They are impatient, short-term oriented, and quick to jump ship. This trader mentality causes them to focus on quarterly results and market volatility. They want excitement and action. And to their own detriment, they fixate on daily price quotes and trade way too much.


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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 SeekingAlpha.com 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.

Analyst’s Disclosure: I am/we are long EPR; SRC; MPW. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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