Is homeownership a substitute for investing in a REIT? If it isn't, is one option better than the other and which is it?

Homeownership implies the owner living in the property. This, of course, cannot be a replacement for any form of investment.

Perhaps you may be referring to property investment where the house is meant for investing rather than living in.

Personally, I feel REITs or corporate bonds may be better than physical property investment for a normal retail investor due to:

1. lower capital needed

2. lower cost of investment

3. lower complexity

4. higher liquidity

5. more convenience