Quote:
Originally Posted by quelinda
Yeah, but you hold something tangible like a building rather than stocks that can literally pooof into nothing. Even the low priced stocks can poof even lower into nothing. A building still sits there and still collects rents and eventually (maybe another decade?) will probably climb mile high again.
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let me pass on my 20 plus years as an investor and my personal experiences... yours may be very different. non the less these are real time and not what i think will be the outcome but what actually happened. as an investor im just interested in return on investment. i go where there is money i think to be made plain and simple. i found buying and selling co-ops to be right for me. sometimes i flipped them other times i had to hold long term because markets crashed both in stocks and real estate and i had to actually be (gulp) a landlord
actually index funds may drop 40-50% during downturns but thats always been part of the cycle. the day the markets crashed back in 1987 and we lost 25% in one afternoon and it looked like the world ended the dow closed at 1735.. here we are 20 years later panicking because we fell to 9,000. its almost comical for those that have been in it long term ..
ill give you some of my actual results for the last 20 years which has seen both equities and real estate go thru quite a few boom to bust cycles
in 1987 my house was 235,000. it fell to 170,000 after the market crashed and i sold it 5 years ago for around 350,000
the kew gardens apartment was 75,000, today 140,000, the apartment had negative cash flow for a decade before rents caught up to monthly outlays
the kew garden hills apartment was 90,000 today 200,000, it was as high as 225,000
the big guns are the central park apartments , those back in 1987 were around 300,000 and today 1.2 million.. rent stabilization has remaining tenants paying 2500 a month for a 5,000 a month apartment. only 2 apartments left out of 9 as we bought all leases out over the last few years for 50,000 each and sold the apartments. got 2 for sale right now .. longest ever on the market 2-1/2 months. usually they sold in a week....
all sounds great , however my diversified mix of equity funds following the same fidelity insight newsletter for the last 20 plus years saw 100,000 go to 1.5 million and now roll back to around 1.1 million.. no speculating, no trying to time the markets, just buying well diversified funds spread over thousands of companies and all sectors and staying fully invested thru ups and downs taking the good with the bad.... quite a difference from the real estate investments . thats enough to buy 3 houses like i had
of course we all know the past never reflects the future but i think real estate will have just as tough of a head wind going forward as equities will. maybe even more as soooo many people are either out jobs,will be out jobs or just get paycuts that rents may suffer .
dont forget also while you may say yeah but you paid off the real estate with other peoples money but the truth is you also payed 2 to 3x the purchase price in interest most likely doing it while only getting back in taxes about 1/3 ... and you may have had quite a few years of negative cash flow especially in the early years. its so tough not putting down alot of money and getting enough rent to have a positive return after expensess.. nothing is a bigger horror than a property where cash flow turns negative, leverage is a double edged sword and while putting down 10% may seem like a powerful lever it comes back to bite you in the butt when things go wrong. you loose many more times your origional investment. its a kin to buying equities on margin where you can do the same thing. lots of those stories today as people have seen 2x their investment evaporate in many cases.
then when you sell theres closing costs and all that wonderful depreciation allowance that you thought made you profitable all those years gets recaptured and you pay it all back at regular income rates not even capital gains rates. dont forget as time goes on you hopefully are more and more successful earning more and more so now that depreciation you wrote of when you were in the 15% or 25% bracket gets paid back maybe even at amt levels which overall can have you paying near 40% back including local taxes
like everything else thinking about doing something, reading about doing something and learning about doing something is a whole lot different when you actually do it and put your money and life savings on the line.
remember all markets including real estate can remain irrational alot longer then any of us can remain solvent.
and of course real estate is great until its not. one bad tenant can cure you of ever wanting to do this ever again... when you see how landlords are treated in housing court and what you have to put up with from tenents who dont pay the systems a joke.... one day ill tell ya all about my experiences when good tenants turn bad.
im not telling anyone dont do it, thats silly, im just giving you a heads up if you never did it, its not as simple as buy a multi family dwelling and the cash rolls in and your on your way to riches... do you know everyone of those guys that wrote books like the famous no money down books and carlton sheets's books and seminars have either failed miserbly and are doing something else other then real estate or they went bankrupt as once cash flow stopped because of a tenant not paying the whole domino effect took place wiping them out
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