www.financialsamurai.com

Great article, this is one of my favorites that I come back to time-to-time as I think about possible allocation changes in my portfolio. Excluding my primary residence, 30% of my portfolio is in direct real estate. That’s intentional as I work in real estate professionally and wanted to get exposure in my own portfolio. I am becoming more interested in getting the real estate crowdfunding platforms, but I get hung up on the taxes. I can effectively pay no taxes on direct real estate cashflow due to things like depreciation. But I believe distributions from a crowdfunding platform or REIT are taxed at ordinary income levels. When I sell a property I own I can 1031 and defer capital gains – with a crowdsourcing/REIT I pay cap gains tax. That’s a big difference in after-tax cashflow and proceeds, to the point where I think the additional risk in direct real estate investing vs crowdsourcing/REITS is more than offset. Am I missing something?