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I've seen claims here of making 2-3 times the return in real estate, as compared to the stock market. Okay, I'll split the difference and go with 2.5x. Assuming investment capital of only $5000 each year, after 40 years one should have a net worth of about $200 million. Assuming 4:1 leverage and an average home price of $400k, that comes to 2000 properties. So, if after 40 years one is not managing a real estate portfolio on that sort of scale, the story does not add up. It's possible the claim of high returns is based only on a favorable time period, or there could be some fuzzy math involved.
I don't know of anyone owning that many rental properties, not even close. There is a fellow in our office who owns 15 rentals, which is the biggest long-timer I know of. Most people seem to reach the limit of their own personal time/energy at a smaller number than that.
Until you get systems in place . Then it’s less time consuming.
But then that needs as you, say intelligence and skill to get there.
I think a lot of people invest in the market then see real estate and the glamour of it and jump in and expect it to take the same time commitment which is very little with the market.
They don’t research it adequately and get killed.
Mathjak says you can avoid losses with one click. How did that work for Bernie Madoff’s clients?
crime is a whole other thing ,..that isn’t unique to just investing in markets …scams and fraud plague real estate
One click and and the bad streak ends. So how do you know if it’s a bad streak or just normal fluctuations?
So your personal experience means everyone will have it? Got it.
8 months? You must have been inexperienced in rentals. Exactly how many times did this 8 month experience happen to you and out of how many rentals? If you had only one rental yes that’s bad. But I have a friend that owned only one stock and lost everything to counter your bad experience.
I’ve never had that happen in over 40 years of being a landlord and have had a lot of rentals. What was the difference between you and me?
As I said both are arenas have streaks.
with diversified funds as a long term investor it’s irrelevant as it is only market volatility and no timing is needed to time a sell .
totally different issue then a stock trader
my point is with a click of a mouse i can swap investments , raise cash or spend it ….i didn’t say it’s about bailing in or out of markets trying to time when to be in or out
we have had down real estate markets too so no asset is immune to market ups and downs and few can time them and come out ahead
Last edited by mathjak107; 11-29-2023 at 03:25 PM..
I've seen claims here of making 2-3 times the return in real estate, as compared to the stock market. Okay, I'll split the difference and go with 2.5x. Assuming investment capital of only $5000 each year, after 40 years one should have a net worth of about $200 million. Assuming 4:1 leverage and an average home price of $400k, that comes to 2000 properties. So, if after 40 years one is not managing a real estate portfolio on that sort of scale, the story does not add up. It's possible the claim of high returns is based only on a favorable time period, or there could be some fuzzy math involved.
I don't know of anyone owning that many rental properties, not even close. There is a fellow in our office who owns 15 rentals, which is the biggest long-timer I know of. Most people seem to reach the limit of their own .
personal time/energy at a smaller number than that.
depends on the situation as i mentioned with our real estate . i was never one who cared for for traditional real estate investing where you buy for income and hope for appreciation.
i like special situation stuff like buying prestigious co-op apartments with rent stabilized tenants who didn’t buy when the building converted to coop in the 1980s.
with break even rents they go for cents on the dollar .
we made more then 10x our intitial investment in about 10-12 years simply because the profits were already in place when we bought the package . any appreciation after we bought was icing on the cake .
it was just a matter of getting the tenants out via buy out offers so the gains could be realized .
could we have made that kind of money in traditional real estate investing ? very unlikely . we certainly didn’t do it with our kew gardens apartment which was a traditional situation
but that is why these special situation deals are the play ground of the pros and is basically a good ole boys club as you need to be privy to these deals .
when we wanted to sell the two remaining apartments dirt cheap and close out our LLC ,our broker contacted the players they know and in a matter of days a deal was made .
so these kinds of deals are not advertised .
to give you an idea of the these kinds of deals , the two remaining apartments where we couldn’t get the tenants to take a buyout and had break even rents were sold for 360k for both .
they had a market value that if empty was 1.1 million each ..today it’s 1.35 million each or more with the additional appreciation….in about 3 or 4 years time they are sitting on 2.7 million or more in value with a 360k investment.
when we bought we bought for less on the dollar then they did
Last edited by mathjak107; 11-30-2023 at 03:31 AM..
depends on the situation as i mentioned with our real estate . i was never one who cared for for traditional real estate investing where you buy for income and hope for appreciation
I'm referring to claims of making 2-3 times the return from stocks by owing houses and leasing them to long-term tenants. Over a few years, sure anything can happen. Over decades? Anyone can do the math in Excel or with a calculator to see the implications... how many houses that would amount to after 40 years.
It is a mistake to somehow compare owning rental property (which is operating a business) with owning the S&P 500 (which is investing).
It is more appropriate to compare operating a rental property business with other businesses one might own: a dry-cleaner or a pet store or a furniture repair business. Some people naively thing that being a landlord involves fewer hours in the week than operating another type of business. Well, being a successful landlord, like operating any other business, is time consuming and requires intelligence and skill.
I guess that further strengthens my point that I don't want it to be a full-time job or even a side job. I already have a full-time job that provides with with ample income. To each their own, obviously, but it's just not something I would endeavor to take on vs. simply trying to retire early via my equity/bond/ETF/fund investments.
I'm referring to claims of making 2-3 times the return from stocks by owing houses and leasing them to long-term tenants. Over a few years, sure anything can happen. Over decades? Anyone can do the math in Excel or with a calculator to see the implications... how many houses that would amount to after 40 years.
i agree that could be tough unless in an area that went through gentrification.
my fidelity insight growth model blew away our conventional investing in kew garden queens so not even close to beating our market investments
i agree that could be tough unless in an area that went through gentrification
It's more than just finding the right neighborhood. Ultimately it comes down to a numbers problem. The supposed returns rely on maintaining some amount of leverage, which means buying more and more properties at an accelerating rate over time. I personally do not know anyone who does this, nor have I seen any mention of this online from anyone. The usual strategy is to buy a few houses with loans and then get most or all of them paid off by the time they hit retirement. That's all fine, but it's not going to produce the claimed returns.
Equity investors do not run into the "numbers problem" until much higher levels of wealth. In practice, there is little difference between investing ten thousand dollars in stocks versus ten million dollars in stocks.
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