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Why real estate is a good investment.
1. Gross spendable income.
2. Equity income.
3. Tax shelter.
4. Depreciation.
Real estate is the only investment vehicle that can offer the investor FOUR unique or different returns on his/her investment. Period. And the Banks and life insurance companies know this - why do you think they invest your money in real estate?
Why real estate is a good investment.
1. Gross spendable income.
2. Equity income.
3. Tax shelter.
4. Depreciation.
Real estate is the only investment vehicle that can offer the investor FOUR unique or different returns on his/her investment. Period. And the Banks and life insurance companies know this - why do you think they invest your money in real estate?
Are you talking REIT's or individual homes? I think you might be confused....
Two totally different animals.
If you take out a HELOC, its not like they "forgive" the loan. You still have to pay back it back.
Historically, equities still a much better financial investment than an individual home. I could provide links if you like.
Are you talking REIT's or individual homes? I think you might be confused....
Two totally different animals.
If you take out a HELOC, its not like they "forgive" the loan. You still have to pay back it back.
Historically, equities still a much better financial investment than an individual home. I could provide links if you like.
Since you're discussing real estate as an investment and someone (possibly not you, I'd have to check) seems to feel stocks outperform real estate as an investment, they don't. And they never have. You can take a loan from your stocks and other investments, pay them back and still make more money than if you'd left that money in the stock market. Stocks have never performed at the mythical numbers folks like to throw around. I can provide just as many website links as you. Money magazine recently outlined the "true" performance of stocks over time.
Real estate outperforms stocks over time as an investment.
A simple exercise with a calculator proves this point.
Since you're discussing real estate as an investment and someone (possibly not you, I'd have to check) seems to feel stocks outperform real estate as an investment, they don't. And they never have. You can take a loan from your stocks and other investments, pay them back and still make more money than if you'd left that money in the stock market. Stocks have never performed at the mythical numbers folks like to throw around. I can provide just as many website links as you. Money magazine recently outlined the "true" performance of stocks over time.
Real estate outperforms stocks over time as an investment.
A simple exercise with a calculator proves this point.
walidm, I don't disagree that many successful people have gotten filthy rich investing in real estate. My example would be a homeowner who believes their home should appreciate in the double digits. I've talked to so many people who believe this which is so far from the truth.
Quote:
Originally Posted by walidm
Stocks have never performed at the mythical numbers folks like to throw around
Not sure what "mythical" numbers you are referring to, but investment returns will be lower if an individual investor isn't a true buy and hold w/periodic rebalancing. Many fall into this trap and succumb to the "noise" omitted by the likes of CNBC and such. Like anything else, it takes discipline. If you can't stay the course, your returns will be lower, I agree.
Cool...we're on the same page I believe.
A home is not an ATM. It will over time return terrific value. As an investment it will normally, for an investor dramatically outperform stocks. Stocks over time perform exceptionally well. Now is reasonably good time to buy a home and/or stocks (or any time the market shows an extended period of decrease).
Still waiting on some data or facts to back up the opinion.
Insofar as my PERSONAL portfolio is concerned, it has outperformed even the most bubbly areas of California, including the San Francisco Bay Area over the past 10 years.
Don't expect you to believe me. Short of scanning my brokerage statement for all to see (not likely), I'll just explain the method of my madness .
My liquid assets are physical gold, silver, Everbank CDs in Icelandic Krona, and dividend income yielding equities, all very conservative natural gas/oil trusts yielding 10-15%, in Canadian dollars which has skyrocket and achieved parity or better against the US dollar, producing a foreign exchange tailwind.
However, my IRA is highly speculative given my age (34), and consists mostly of agricultural commodities, Chinese mining companies, and Australian precious metal (silver mostly). Xinxin Mining has been my top performer, having sold in Sept it went from 0.21 to 11 before I sold at 9.78. It's outperformed both Apple and Google from their IPO to their peak. But again, these are the most speculative and I don't recommend those to just anyone.
The last time I held US stocks was an ETF shorting subprime lenders last year. It was one of the best performers but Xinxin still dwarfed it. I also shorted BZH and TOL before that.
I own a primary residence, but it's a small 1300 sqft house I purchased recently as a short sale. I put zero down in the event the property loses value, and if the loss is substantial I'll walk since my state is a non-recourse state.
I say this not to sound conceited or make myself out to be some sort of profiteer off other peoples' misery. On the contrary, I tried many times to convince people in my area not to buy a home unless they were sure they'd live in it for at least 10 years. Now most of those colleagues and friends are hurting something awful. I keep my mouth shut around them out of politeness. No one wants an "I told you so" around them.
In order to provide you with true empirical data, one would have to conduct a controlled experiment with participant A and participant B (or representative groups), define the parameters of speculation vs. conservative on both sides (no Bay Area, shore property or IPOs and emerging markets on the stock side). To provide you with true data, I cannot do and thus you win the debate by default.
Last edited by ViewFromThePeak; 02-17-2008 at 08:03 PM..
View from the peak, your example shows that you have been extremely lucky; and I congratulate you on the success.
Putting your IRA into such speculative stocks, even at age 34, is extremely dangerous, and no financial planner would ever advise such a strategy because it is a recipe for financial disaster.
So far you have had successes, but when dealing in penny stocks in any country and especially in a foreign country such as China, you will eventually sustain losses.
I would also question an investment that has a yield of 10 to 15% as being conservative.
Investing in stocks is to have a portfolio that is balanced, and that is weighted somewhat to your risk tolerance, but with an overall buy and hold strategy. Warren Buffet is the shining example of the buy and hold strategy that will build wealth. His brilliance is in choosing companies that he understands, and avoiding industries where he has no knowledge, such as technology.
Investing in real estate is also to have a portfolio of properties that fit one's particular investing criteria; such as single family homes, 4 plexes, apartments, etc. Fix and flip is a speculative strategy, not an investment strategy. A solid goal in real estate investing is to build a large portfolio that provides sufficient cash flow so that one can retire and make a living on the investments alone, with the income and the property value increasing at a higher rate than the inflation rate.
Your portfolio tells me that you are a speculator, not an investor. That means you can make a lot of money if you're correct, and so far you have been; and you can lose a lot of money, much faster that it was made, when you are wrong.
Because you have been successful in speculating does not prove that stock investing is more profitable that real estate investing. This is just one person's success story at speculation. I hope your success continues for you.
I own stocks also, and in the past I also speculated, but not any more. Once I made a lot of money by speculating on one stock. (A very dangerous strategy) My wife told me to take the money and run, but I thought I was a stock genius after making so much money so quickly and I was going to hang in there and make more.
Then one night, I mean literally overnight, the after hours traders trashed the stock. It lost 80% of it's value by the time it opened the following day. My new found riches were gone forever, and my inflated ego was busted. I was no longer this brilliant stock investor that I thought I was. I was merely a speculator that made it fast and lost it faster because I didn't use common sense.
Needless to say I stopped speculating after that. My wife never tells me that she told me so, but I keep saying I wish I had listened to her because she was right.
View from the peak, your example shows that you have been extremely lucky; and I congratulate you on the success.
Putting your IRA into such speculative stocks, even at age 34, is extremely dangerous, and no financial planner would ever advise such a strategy because it is a recipe for financial disaster.
So far you have had successes, but when dealing in penny stocks in any country and especially in a foreign country such as China, you will eventually sustain losses.
I would also question an investment that has a yield of 10 to 15% as being conservative.
Investing in stocks is to have a portfolio that is balanced, and that is weighted somewhat to your risk tolerance, but with an overall buy and hold strategy. Warren Buffet is the shining example of the buy and hold strategy that will build wealth. His brilliance is in choosing companies that he understands, and avoiding industries where he has no knowledge, such as technology.
Investing in real estate is also to have a portfolio of properties that fit one's particular investing criteria; such as single family homes, 4 plexes, apartments, etc. Fix and flip is a speculative strategy, not an investment strategy. A solid goal in real estate investing is to build a large portfolio that provides sufficient cash flow so that one can retire and make a living on the investments alone, with the income and the property value increasing at a higher rate than the inflation rate.
Your portfolio tells me that you are a speculator, not an investor. That means you can make a lot of money if you're correct, and so far you have been; and you can lose a lot of money, much faster that it was made, when you are wrong.
Because you have been successful in speculating does not prove that stock investing is more profitable that real estate investing. This is just one person's success story at speculation. I hope your success continues for you.
I own stocks also, and in the past I also speculated, but not any more. Once I made a lot of money by speculating on one stock. (A very dangerous strategy) My wife told me to take the money and run, but I thought I was a stock genius after making so much money so quickly and I was going to hang in there and make more.
Then one night, I mean literally overnight, the after hours traders trashed the stock. It lost 80% of it's value by the time it opened the following day. My new found riches were gone forever, and my inflated ego was busted. I was no longer this brilliant stock investor that I thought I was. I was merely a speculator that made it fast and lost it faster because I didn't use common sense.
Needless to say I stopped speculating after that. My wife never tells me that she told me so, but I keep saying I wish I had listened to her because she was right.
The dividend yielding stock isn't Enron or something else. They are pure cash cows whose stock price fluctuate very little. They're not meant to be traded, but held over the very long term. I also don't trust most stocks that don't pay a dividend since they're price is inherently driven only by true speculation and charts. Xinxin was an anomaly also. I'd rather invest in a company that shares profits with the shareholder, not leave them all to the fat cats on the board.
If you noticed, I don't have a single tech stock in the portfolio. They are all mining related as well as commodities and energy. These are the general plays going into a stagflationary period as American is starting. Consumer prices are going to go up based on the devalued dollar. Rather than being angry when going to the pump, I could actually be jovial for price increases.
The general trend was noticable for someone who understands the fundamentals. Consumer spending is going to drop precipitously, metals/commodities/oil are going to do well, etc etc. I've played on the general trend.
I would rather put my money in American stocks, but other than a handful I cannot see the point. Also, the dollar's value will probably fall sharply as Uncle Ben drops rates and prints a ton of money. Purchasing a house with no money down was merely a call option for me. If the price goes up or stays the same, I stay put and exercise the option. If the price declines, I leave and don't exercise the option. Yeah, my credit will be hit (hard), but I will do a cash purchase next time round will my credit score recovers.
Speaking of highly leveraged investments, I would never invest in a portfolio of homes because I'm highly leveraged on the down side as well. If I purchased 4 CA homes as part of a strategy and each lost 50K in "value", I'd be out 200K in an instant.
I could understand the speculative comment if I got burned, but out of over a dozen equities, not one tanked over a period of over 3 years. Agreed, from the surface, definitely looks speculative. But, I'm following an economic trend, not a particular stock's graph. My feeling that consumers were overextended and our insane monetary policy of figuratively dropping money from helicopters to buy overpriced houses was confirmed, and this shouldn't have come out of left field for anyone.
Last edited by ViewFromThePeak; 02-18-2008 at 06:29 AM..
Ok the young writers are investors just like short term traders. Market down the they buy and market up they sell. A normal career progression might suggest that the headline writers are not the same people. Food for thought
Any evidence to back this up? I've never seen any studies about the age distribution of writers and their investment habits, nor have I seen studies about the changes in these distribution in relationship to housing market reporting styles. Can you point me to them?
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