Real Estate Trends Worth Watching

In this episode of Motley Fool Money, host Chris Hill and Motley Fool analyst Jason Moser discuss:

• McCormick‘s ( MKC -0.49% ) first-quarter results being fueled by the business-to-business part of the company;
• Why executives are optimistic about the rest of the fiscal year;
• Fred Smith stepping down after more than 50 years of running FedEx ( FDX -1.10% ); and
• The leap of faith investors must take when it comes to CEO succession.

Investing in real estate is less appealing if it involves 3 a.m. phone calls from a renter. Motley Fool analyst Matt Argersinger talks with Motley Fool personal finance expert Robert Brokamp about some current real estate trends he’s excited about, as well as some key points of investing in real estate investment trusts (REITs).

To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on March 29, 2022.

Chris Hill: A visionary CEO rides off into the sunset and a real estate trend moves to the foreground. Details next, Motley Fool Money starts now. [MUSIC] I’m Chris Hill, joined by Motley Fool Senior Analyst Jason Moser. Thanks for being here.

Jason Moser: Hey, thanks for having me.

Hill: Last Friday on the show. We did stocks on our radar with Steve Broido, and the stock on your radar was McCormick.

Moser: Shocker.

Hill: This morning, the spice maker came out with first-quarter profits and revenue that were higher than expected, but the stock is down a little bit because of supply chain issues, inflation. Before you get into the nitty-gritty, what did you think of the quarter?

Moser: Yeah. Your points are spot on there in regards to supply chain constraints and inflation. But all things considered, I thought this was a really good quarter. It was right in line with the guidance that management has set. Last quarter they set the table, no pun intended, for the year. Gearing for revenue growth of 5% at the midpoint, calling for earnings per share of $3.20 for the year, and they’re maintaining that. For the quarter, they grew sales 4% in constant currency, so for me, I prioritize first and foremost, I’m looking for a company to meet the goals that they set. I’m more focused on them meeting the guidance and expectations that they set versus what arbitrary goals perhaps analysts might set. From that perspective, I look at a quarter like this and I think this is right in line with what they were telling us they were going to do, and as a shareholder or someone who’s recommended the stock before, that gives me comfort. The management knows this business very well. As you said, the supply chain constraints and inflation are coming into play here and that play out on operating income, it wasn’t terribly surprising. So management, they see a stronger second half of the year, and a lot of that is due to price increases that are going to be phasing in here during the second quarter. The nice thing is that McCormick is demonstrated over time, the ability to raise those prices just incrementally here and there without really seeing too much of an impact to the business. All things considered, the consumer side of the business, the flavor solutions side of the business, all of it put together, it seems like this is a business that it’s managing the current environment very well.

Hill: Can you remind me of the percentage between those two parts of the business because I think anyone who’s been into a grocery store, you walk around, you’re going to run into McCormick. It’s easy to get a handle on what the consumer side of their business looks like. But you mentioned the part which is essentially the business side, though, McCormick’s selling directly to restaurants and companies that make packaged foods, and by the way, revenue was up 12% in the quarter in that division. But when you put those side by side, obviously, they want both to be growing, but is one more important than the other?

Moser: I don’t know that really I would say one is more important than the other. What we’re seeing certainly is the business, they are witnessing some more strength in flavor solutions, which is the side of the business that they service. The packaged goods and restaurants and things like that, I think it used to be called actually the industrial side. But ultimately what you get with that is a little bit of a lower-margin business because it’s such higher volume. They don’t necessarily witness the same pricing power necessarily on that side that they do on the consumer side. But you’re right. They definitely like to see both parts of the business contributing equally more or less, and that’s what they’re doing. But it did seem like for the quarter they saw more strength in flavor solutions as continued demand recovery of away-from-home products continue to grow for the quarter.

Hill: That’s interesting to me that is the side of the business that has lower margins. Is it because competition is a little tougher in that regard?

Moser: Well, I don’t think it’s that as much as maybe they’re just dealing with bigger-scale customers. Typically, when you’re dealing with bigger-scale customers like that, you are going to be conceding a little bit more on the pricing. You’re going to be offering a little bit more on the value side, whereas on the consumer side, you are able to pass along a little pricing here and there. So I think, generally speaking, that’s the way you have to look at this business. That’s why it’s so valuable to have both sides because if one is witnessing some headwinds, the other one is typically there to pick up the slack. If you remember, just a couple of years ago, we were really talking about how the consumer side of the business was performing so well because so many people started cooking at home again. Or realized the merits of cooking, or just even took it on to learn how to cook at home. I think that what they’ve seen and what they’re talking about in these calls is they’re seeing that stick. They’re seeing a lot of these folks that took it on themselves to start trying to cook at home a little bit more over the last couple of years. Maybe they’re realizing the value in that. Maybe they’re realizing that you can make good food at home. You can do it for cheaper. You can do it on your own terms and you can have what you want. Let’s face it. I can cook all my life. Cooking is fun if you know how to do it, [laughs] so it’s a nice skill to have. It is nice to see that over the last couple of years they benefited from that consumer side as more and more people were eating at home. Now that we see the economy back and running, people are back out doing things, they’re still seeing stickiness there of people cooking at home. But now they are seeing a resurgence of recovery in that flavor solutions side of the business as well, as more and more people continue to go out.

Hill: It is interesting to think about their optimism for the rest of the year because part of what we’re seeing and I agree with you, it’s more important to me to see a business meeting their own expectations versus Wall Street’s expectations. However, Wall Street’s expectations are [laughs] a fact of life when it comes to investing, and I think that’s why we’re seeing the stock down a little bit. Because overall revenue, while it grew, the year-over-year growth, I think it was like 4%. A year ago that growth was 20% because it’s coming off of the pandemic. Do you get a sense that they expect that number to take up higher into the higher single digits? Or are they coming up against slightly lower year-over-year comps?

Moser: I think they’re coming up on a very difficult hurdle last year. So you’re right that the 20% growth. Now I will say if you look at the organic growth, that actually was 16%, so the 20% reflected some of the incremental sales they’ve gained from the acquisitions of Cholula and Fona. For a business like McCormick to grow 16% is somewhat abnormal. That’s a little bit of an outlier. It’s not something investors should expect, and management has done a very good job through the years of really giving, I think not just conservative, but just reasonable guidance and usually pretty accurate guidance. This isn’t a business where I think investors should be looking for double-digit revenue growth year over year on a consistent basis. That’s not really why you would own the stock. It’s a bit more of one of those stable ideas that it’s of a marathon, not a sprint. It’s a Dividend Aristocrat, that they care about returning value to shareholders. They care about that status as the Dividend Aristocrats will continue to raise their dividend every year, I would imagine for the foreseeable future. They put themselves in a financial position to be able to do that. I think the nature of the business allows them to do that as well because it’s such a strong recurring sales of business. I don’t know that they necessarily are aiming for something greater than 6%. It’s a range of 4 to 6% for the year. They did know they will be putting through some price increases this year, so it remains to be seen exactly how that impacts the financials that could in theory be a drag on the top line if consumers really do continue to pinch the purse strings, so to speak. But generally speaking, they do a very good job of nailing that guidance and giving us reasonable expectations. I think that you look for a business like this to return 3, 4, 5% annualized revenue growth for the foreseeable future. As they continue to grow, I think the wild card there, they’ll continue to examine the acquisition landscape because we’ve seen them making a number of acquisitions through the years that have really added to the strength of their overall portfolio. The French’s acquisition was at the RB Foods. We had Cholula, Frank’s RedHot, you got on that portfolio now, you’ve got the Fona acquisition. They are absolutely going to continue looking at the acquisition landscape because they’ve proven that they are very good at doing it. I think the scale gives them the opportunity to really plug any brand or family of brands in there, and immediately distributed globally, which is a very attractive prospect for businesses like this.

Hill: Last thing before we move on. On the show last Friday, Steve Broido floated the idea of a marketing campaign from McCormick, which encouraged people to [laughs] check the expiration date. We laughed. We thought, well that’s funny. Something happened to me over the weekend that made me think, no, they should actually do this. Because over the weekend I walked into the kitchen and the person to whom I’m related by marriage [laughs] was going through the spice cabinet and throwing things out. I said, “Oh, what’s going on?” She said, “Take a guess, what do you think is the expiration date for the year of this nutmeg?” [laughs] that she was holding in her hand. I said, “2020? 2017?” 2011.

Moser: Yeah.

Hill: It expired in 2011. I’m in the market now for a whole bunch of spices [laughs], and the folks at McCormick should really consider this.

Moser: I want to tell you what, we joke about that, but you’re absolutely right. I feel like those expiration dates when it comes to herbs and spices are a little bit more from a liability standpoint than anything else. They do seem to outlast those expiration dates. But there is something to be said for fresh herbs and spices. They do lose their quality over time, and if you’re talking like oregano or red pepper flakes, I go through bottles upon bottles, so that stuff every year. I don’t run into that problem. But, all of a sudden, you look at my turmeric, and I’m like, well, I might use that a couple of times a year over the course of a decade. [laughs] Yeah, I think that’s a great idea. I think on the show I like to basically be the streaming businesses saying, hey, we’re going to cut down on people password sharing that to try to make this a little bit more fair for everyone. There’s no question, I think if everybody collectively here domestically just went through their spice cabinet to check the expiration dates. There would be a run on McCormick’s spices [laughs] over the coming quarter, I suspect.

Hill: More than 50 years ago, Fred Smith started the business that we now call FedEx. Late Monday, the company announced Smith will be stepping down as CEO. President and Chief Operating Officer Raj Subramaniam will become the CEO on June 1. Fred Smith is 77 years old. First and foremost, you just got to tip your cap to someone…

Moser: Absolutely.

Hill: …who created a business where none really existed previously, and I think the fact that shares of FedEx are up 4% when I checked about 20 minutes ago is a testament to confidence that he’s got the right successor.

Moser: Yeah. I think you’re right. I mean, congratulations to Mr. Smith. That’s a just a heck of a job, really well done and just building this business from the ground up, he has been a CEO since 1998, retiring at 77. Hopefully he enjoys his golden years. Go play a lot of golf, if you play golf. I do think you’re right. I think the market is probably looking at Raj today and thinking that they’ve got the right person for the job. He is 55 years old. He’s been the COO of the business since 2019. But I think more importantly worth noting, he’s been with the company since 1991. We always love to see COOs being considered for that CEO role because there’s so intimately familiar with the business, and given Raj’s history with the business, he’s held a number of different positions and a number of different geographic locations, I might add. It’s hard for me to imagine there is someone more intimately familiar with this business than him. Given his age, given his experience with the business, and given the shifting nature of this landscape. When Fred Smith was in his prime here, he didn’t have e-commerce the way we have it now. He didn’t have everybody getting everything shipped to their houses same day or next day. It’s worth noting. The demand for services that companies like FedEx provide has grown immensely over the last several years. I think leads to a bit of a shifting landscape. It’s a more competitive landscape. You see businesses like Amazon getting in there, wanting to capture some of that logistics and fulfillment market opportunity there, and so for me, I think this is as good a shot as any for FedEx to continue maintaining the relevance and into being able to change with the changing landscape. It’s not been the best investment, I think, over the last several years. If you look at the 10-year chart, the total price return there, it’s trailing market. It’s not been a bad investment that the investors made, its stock’s up just under 200% over that 10 years. Five years a little bit of a different picture there. It’s up around 35% trailing the market as well. But yeah, it’s not to say that this is a shoo-in and he will do well. We’ve seen plenty of examples where a COO step into that CEO role and don’t pull it off. The one that comes to mind is Don Thompson, I think with McDonald’s, that was a very short tenure he had there in the CEO role. I wouldn’t say this is an automatic, but I would absolutely say this seems like the most reasonable and logical choice for the job.

Hill: I read this, this morning. I had a reference to this and I went and looked it up and I’ll just read, what I found online about Fred Smith. Because the origin for this business goes back to his college days. We’ve talked before about John Bogle writing a college paper about the idea for the index fund and he goes off and starts Vanguard and revolutionizes the investing world. In 1965, while attending Yale University, Fred Smith wrote an economics paper exploring how goods were transported in the United States. At the time, shippers focused on transporting large packages across the United States by truck or inside passenger airplanes. Smith thought that a company carrying small essential items by plane could be a more efficient transporter than existing companies. Smith wrote the paper at the last minute, and he did not go into details of how to actually run such a company. His professor gave him a C. [laughs] But then six years later, this idea becomes reality, he starts this company. I want to go back to something that you touched on, which is, when you are an investor, investing in companies is among other things, an active optimism. There is an element, particularly when it comes to CEO succession, that is a leap of faith. That you just have to trust that the CEO and board of directors have done the legwork, and you have to trust their judgment that this is the person who we have chosen to lead the company next, and you just have to take the leap of faith with them.

Moser: Yeah, I agree with that. I think I’ve said it for a while, that investing just in its own and every investment we make it involves a leap of faith and this just a matter of how great of a leap of faith you’re willing to make. That some companies, it’s a very easy leap to make. Some companies you realize it’s a bigger leap, and so you position size accordingly. But there’s no question about it. Everything can look good on paper, or in this case in regard to Mr. Smith’s paper, maybe it didn’t look all that good. I can’t say why he got a C [laughs], but it turned out to be a banging idea. He’s got a $60 billion company he is leaving behind.

Hill: He was light on details. That’s why he got a C [laughs].

Moser: Take that, professor. But yeah, I do agree. Anytime you run into situations like this, you can look at the pedigree and you can see everything on the resume and you can say, this is absolutely the right call. Regardless, there is always a leap of faith there and you have to keep that in mind. There are no givens in this line of work.

Hill: Jason Moser, thanks for being here. [MUSIC] What should investors be watching these days in the real estate market? With the answer to that and other questions about real estate investing, here’s Robert Brokamp [MUSIC].

Robert Brokamp: Some of the oldest asset-allocation advice comes from the Talmud, that ancient text of Jewish law and the advice can be translated as, but every man divide his money into three parts and invest a third in land, a third in business, and a third, let him keep by him in reserve. It’s actually not bad advice really, that puts a good amount of money in safe assets. A good bit in what today we would consider stocks, but also a sizable allocation to real estate. In our March 1 episode, we spoke with Motley Fool Senior Advisor Matt Argersinger about the benefits of buying and renting out real estate. He’s the lead investor for the Fool’s Mogul and Real Estate Winners services and also owns some properties himself. But as we pointed out in that episode, being a landlord could be a hustle, so you may wonder, are there ways to invest in real estate without having to take 3 a.m. calls about plumbing or evicting deadbeat renters? Well, yes there is, and Matt is back to tell us all about them. Welcome back, Matt.

Matt Argersinger: Thanks, Bro, and thanks for having me back.

Brokamp: Let’s start with the easiest way to invest in commercial real estate and that is buying a real estate investment trust, also called a REIT. So tell us about REIT, Matt.

Argersinger: That’s right. REITs have been around for a long time. Actually, they were established in the ’60s, believe it or not, and at the time there were very few REITs, but nowadays there are hundreds of REITs. The reason REITs came about is because they wanted to, like mutual funds for stocks, enable the individual investor to buy into a basket of commercial real estate assets, which was hard to do. It’s still hard to do, but it was really hard to do 50 years ago. REITs came about and there are, like I said, hundreds of REITs. A single REIT usually gives you access to dozens of properties. It can give you access to real estate across the country, or you can have REITs that specialize in certain asset classes, like self-storage or hotels, or office, or retail. As a public markets investor, they’re really accessible ways to invest in real estate. REITs are the best way to do it. Most pay pretty good dividends because they are required by law to pay out 90% of their income in dividends. That also prevents them from being double taxed. As you know, with most dividends that you get from companies, those companies are paying you after-tax cash flow to pay those dividends. So dividends are essentially taxed twice at the corporate level and at the individual level. Well, that doesn’t happen with REITs because they’re pass-through entities. Really there are some other requirements with REITs, but generally they have to have 75% of their assets invested in real estate or real estate-related activities. A great way for the average investor to get invested in real estate.

Brokamp: Let’s talk a little bit about the historical performance. So as you pointed out, they are higher-yielding investments these days. The overall REIT university yields about twice that of the S&P 500. Since 1972 actually, REITs have outperformed the S&P 500, about a half a percentage point or so. Then in about 56%vof the individual years they’ve beaten the S&P 500. The other benefit you’ll often hear about REITs is they’re not always highly correlated to the stock market. Sometimes they are, sometimes they aren’t. So an example of when they weren’t was the dot-com crash where the S&P 500 and the Nasdaq lost money in 2000, 2001, 2002, three years in a row. But REITs actually made money over those three years. But then we had the great recession where stocks of every type fell and REITs really fell. So diversification is often a double-edged sword, but that is one of the benefits of REITs where you get something that will act a little differently than the overall stock market sometime, and actually has a better performance than the stock market.

Argersinger: Not only have REITs, as you pointed out, outperformed the S&P 500 in their history, they’ve also done so with a lot less volatility, about half the volatility of the average stock and the stock market. So over time, if you’re a risk-averse or volatility scared investor, they’re a great asset to let you sleep a little better at night knowing that you have some money in your portfolio in more stable assets that are paying out dividends and then aren’t going to jump around as much like today’s tech companies, for example.

Brokamp: I think these days also people are worried about inflation. When you look at the worst period of inflation for the U.S., which was 1973 to 1981, inflation averaged over 9% a year. S&P 500 only made 5% a year so it actually lost ground on inflation perspective, but REITs actually earn 12% a year. So these days people are looking for inflation hedges, they look to REITs. I think it’s interesting that actually that REITs have done well during inflationary times. Because during inflationary times, interest rates often go up and REITs do rely on leverage. But somehow they still managed to overcome that historically, at least an outpaced inflation.

Argersinger: That’s right. They’ve been an incredible inflation hedge. So you mentioned higher interest rates, that does usually happen with higher inflation. But REITs are able to get around that because oftentimes they’re building in price escalators in their rents. So most REITs get most of the revenue from rental income and those in the commercial world, over long-term leases, five-, 10-year leases that they sign with their tenants. They often build in inflation protection or rent escalators into those leases that add to the rent every year a certain percentage. But also, I think it’s because when you’re talking REITs, you’re talking about hard assets. But like the residential market, like houses, the replacement costs for those assets tend to rise with inflation. So the asset value of a REIT also tends to rise during inflationary times. So they’ve been a great inflation hedge throughout their history over the last 50 years and I expect they’ll do well if you look at many studies at the National Association REITs have done or the CBRE has done. When interest rates rise, when there’s some higher inflation, REITs do tend to outperform, and I expect that will be the case going forward as well.

Brokamp: One easy way to get exposure to REITs is just to buy like a REIT index fund. One of the biggest is from Vanguard tickers, VNQ, I own it myself. The problem is then you own all types of REITs and there are 13 different types you named a few of them. Tell us if you think these days some types of REITs and maybe even some individual companies are more attractive than others.

Argersinger: Sure. Again the the beauty of REITs, like you said, you could really choose exactly what parts of the real estate market you want to invest in. I’ll start with ones I’d probably be a little leery of right now. I would probably stay away from your traditional office REIT, only because I think there were some good values in that space. I’m a long-term believer in office. I just think there’s so much uncertainty hanging over that asset class right now that you’re probably just better to avoid it all together. I think retail is challenging. Retail REITs tend to be challenging, even though I think again, there’s some pretty good value in that space as well. On the positive side, I would take a really good look at hospitality. I think we know what happened to hospitality REITs, hotels and resorts during COVID, terrible place to be. A lot of those REITs were really beaten down. But today, I think with the pandemic hopefully on the way and with things getting back to normal, people traveling again. I think hospitality is set up to do pretty well and the valuations are still really decent. So when I look at a company like Ryman Hospitality Properties, the tickers RHP, or a Pebblebrook Hotel Trust, PEB. These are REITs that specialize mainly in resort-style properties, unique assets within cities and destinations where people are traveling to. I think those are pretty compelling to me. I would also look at self-storage or industrial REITs as well as a bunch of those. Those asset classes are so resilient and in a lot of ways, recession resistant. We’ve talked about industrial real estate I know in the past and how there’s just such a need for more warehouse and fulfillment space as Americans do more of their shopping online. We just don’t have enough of it, and I think that’s got a huge long runway to go.

Brokamp: With the office real estate, it’s interesting. The Wall Street Journal had an article earlier this month. It looked at the data from Kastle Security, the company where your people swipe in and out of their office, and in 10 big cities, offices are only 36% full. They’re mostly still empty, yet according to an Atlantic article, the corporate demand for office space is down only 1%. What’s going on there? Are companies just waiting for everyone to return?

Argersinger: It’s a weird dichotomy. What I think is you have a lot of big institutions and corporations, so I’m thinking the big financials, the banks, but also looking at companies like Google or [Meta Platforms‘] Facebook or Amazon who are looking to occupy more space. They’re growing throughout. They’re adding a lot of new workers, and they really believe in a collaborative work environment. There is demand on that side, but I would say on the flip side of that, you point out the actual physical occupancy of office is so low, and I do think in most cities, even though the demand is still pretty high at the corporate level, we’re going to see less office use in the future. I’m hesitant to say that we’ve reached peak office, but I think we might have hit peak office before COVID and I don’t know if we’ll actually ever go back to the same amount of square footage utilization that we had before the pandemic. I expect a lot of office space that we have today is going to go away. It’s going to be probably transformed into something else, but there is that strange dichotomy of you do have a lot of big corporations who are still leasing office at a pretty big rate.

Brokamp: You’re talking about turning into something else, and we live here in Northern Virginia suburbs of Washington, D.C., and I know of big office buildings that are just sitting there empty as well as some malls that are sitting around being empty even though this is a big metropolitan area. Are real estate companies trying to come up with creative ways to use that space?

Argersinger: Yes, they are in a lot of ways, and we talked about office. You see what’s happening in a lot of cities. Office buildings are being turned into apartment buildings. It’s not easy to do, but that’s something that’s happening, or maybe they’re being turned into more co-working spaces or even hospitality in certain instances. I think with suburban office, and you mentioned malls and retail that’s out there, we talked about the need for more industrial space like warehousing. You’re seeing that happen. Even you’re seeing some malls being turned into data centers, [laughs] for example, which is something we probably need a lot more of as our networking needs just keep expanding. If you’re a REIT investor and maybe your REIT investor is worried that your office portfolio is too big, there’s always a use case for those assets, especially if they’re on good location, high trafficked area. There’s always a use case. It just depends on how it can be transformed to get there, but that is one of the beauties of real estate. There’s multiple ways to use it, and I think these days a lot of the older traditional ways retail office is being transformed into other more higher use activities today.

Brokamp: Talking about REITs and as you mentioned, REITs have been around for a long time. Something that feels to me at least a little newer is crowdfunding. Tell us a little bit about what that is and why that might be more attractive than just buying a publicly traded REIT.

Argersinger: We talked about some of the advantages of REITs. They’re in the public markets, you can buy and sell them like stocks, there’s high liquidity and you can get really big diversification. What that doesn’t give you, though, is access to maybe a single asset. Let’s say there’s a office building in Chicago or a hotel in Los Angeles that you really want to invest in. Accessing that has still been pretty difficult for the average retail investor. That is until crowdfunding has come along. Really over the last 10 years since the Jobs Act was passed, you’ve had this explosion really in the private equity side of real estate, but the private equity side that’s now accessible to a retail investor, and unusually in most cases, an accredited investor. That’s out there. I would say there’s many advantages to that. Usually, like I said, you get access to a single asset. The rewards can be greater because oftentimes you’re investing in maybe a development that’s going up or maybe like I talked about office being transformed into apartments. You’re investing in a deal that’s taking a single office building and converting it to apartments, that can be pretty exciting to invest in. The rewards can be great. The risks are certainly greater, and also you’re not getting the same diversification that you get with REITs. You’re also not getting the liquidity you get with REITs. Oftentimes with these crowdfunding deals, you’re investing for three, five, sometimes 10 years before you even get any profits out of them. That’s something you really got to take into account. The minimum investments can be pretty high, anywhere from 25,000-50,000, even $100,000 per investment, whereas, of course with REITs, you can invest $100 in your brokerage account today if you wanted to and buy and sell it tomorrow. Lots of advantages and disadvantages on both sides. I think if you’re a real estate investor who’s looking to maybe take your game to the next level and you happen to be accredited, I think crowdfunding can be an option to look at. You just need to be aware of the risks that are out there.

Brokamp: Let’s get into a little bit of the nuts and bolts. When you were on and we’re talking about if you want to go buy a house and rent it out or something like that, there are actually some tax benefits. There’s a lot of things you can write off if you own your own properties. There is depreciation, there are things like the 1031 exchange where you can basically roll the gain into a new property in a certain amount of time. Does all that apply to these types of investments or is that pretty much exclusive to you going out there and owning your own property?

Argersinger: Not necessarily. The same benefits don’t really apply to you because with the average crowdfund investment, you’re only investing in the equity part of the deal. It’s very much like you’re investing in the stock market, it just happens to be in the private space. You’re only going to get the pass-through benefits of that entity you’re investing in. It’s all rolled into the return you get, but you don’t get to take advantage of that at an individual level with your taxes that you might if you owned your own rental property and could work through all that on your own, but at the same time, because you’re only on the equity side, you don’t have a massive mortgage to deal with. We talked about earlier, you’re not dealing with tenants. That’s all being handled at the entity level. You’re just an equity investor in the deal and so you get the profits, you get the upside, you get cash flow and distributions, and you don’t have deal with the headaches, but you also don’t get some of the other added benefits that you would get by being your own landlord.

Brokamp: Well, Matt, this has been great. Thanks for joining us again. Where should people go to learn more about real estate investing?

Argersinger: Well, they can go to realestateinvesting.fool.com. Again, that’s where a lot of our free real estate content goes. Go check that out. I would also say, if you’re really interested in learning more about REITs specifically, there’s a great book by Ralph Block, a former Fool by the way. [MUSIC] I think, Bro, you used to know him.

Brokamp: Yes. Great.

Argersinger: Ralph Block, and his book is called Investing in REITs. That has gone through several additions now, but if you get the latest addition of that book. I’ve read it twice actually, and it’s a book I rely on a lot within my premium services that I work on. Fantastic book. Just really dives into all the aspects of REITs from basics to advanced topics. It’s really a great book. [MUSIC]

Hill: As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don’t buy or sell stocks based solely on what you hear. I’m Chris Hill, thanks for listening. We’ll see you tomorrow.