Why Investing in Single-Family Homes Has the Most Advantages

Brian Conlon: Well on a slightly different topic: I could call you Kevin, but that would be weird. I’ll call you dad. So dad, why do you support the notion of investing in single-family homes versus investing in a real estate investment trust or some other real estate related vehicle?

Kevin Conlon: Well first, I would say that I support REIT and I invest in them myself. I also invest directly in real estate, so they both have their place and they both have their advantages and disadvantages. Generally, I like the notion of owning real estate directly versus owning REIT. What I’ve always been troubled by with REIT and real estate investment trusts is: first off you, it’s a security. And because it’s a security and not actually real estate you’re investing in, you do not get the tax advantages of real estate; of owning real estate directly. Because if you own real estate directly, you have the opportunity to take a depreciation write off. And particularly for people who are in higher tax brackets, that’s a very big deal. That has a really large impact on the overall return somebody gets when they are getting their income in a tax advantage way through direct ownership of real estate versus a REIT. Because REIT their job is to invest in real estate that produces income and they pay that in income out as dividends.

And those dividends are fully taxable at whatever your full tax rate is. And that’s not very attractive. What is attractive about a REIT is it’s liquid and it doesn’t require you to be knowledgeable, particularly about real estate. You don’t have to be an expert so you can invest in it. And if it performs well, great. If you want to get out quickly, you can call your broker and sell it because it’s a security. When you directly hold real estate, it takes a little longer to get into it and out of it. But for that extra work that you do, the potential for the returns being higher is there and you get these great tax advantages.

Kevin Conlon – Principal & Co-Founder || Brian Conlon – Business Development

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