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Old 06-04-2013, 01:06 PM
85,966 posts, read 83,490,800 times
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Real estate can be even a bigger loser than the stock markets. Between being leveraged and closing costs you can be eaten alive in a flash. You have no more control over the real estate markets than you do any other financial markets.

at least my market investments can be sold in a heart beat if I do not like the direction of things.

throw in dealing with tenants, evictions , courts and local laws and real estate can be your worst nightmare. it is only great until its not.

I am both a real estate investor in a large way and a financial market investor so I am on both sides of the fence.

Last edited by mathjak107; 06-04-2013 at 01:14 PM..
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Old 06-04-2013, 01:19 PM
Location: Los Angeles (Native)
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I'd argue that one does have more control in real estate versus the stock market. If a company has a scandal or bad quarter and the stock sinks ...you can't do anything about it but sell quickly at a loss. With property there are different exit strategies at least..if you can't sell you can try to rent it. You can improve the property and get a higher sales price or improve it and charge higher rents. These are just some of the ways.

Also if you are purchasing properties that truly cash flow and you are leveraged with a locked in rate/mortgage even if prices go down you are getting income and if you pick the right properties you'd be getting a lot of income .

Another big thing is that in real estate you are able to buy UNDER market value..it happens all the time. In the stock market if a stock is trading for $50 ...you can't buy that stock for less than $50.

If you are buying at the right price and buying properties that truly cash flow it really limits your risks.

In the stock market one has less options to limit risk.
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Old 06-04-2013, 01:40 PM
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you might think it is true about real estate but after more than 25 years doing it that is more wishful thinking than reality.

you can not control the offers when you want to sell, they are whatever they are and you either accept it or don't sel, . you have little control over your non descetionary expenses and you have no control over what happens to your tenants.

you can never charge more for rents than the markets allow regardless of your expenses. most of the big ones can not even be passed on. that 15k for a new roof or 5k for a furnace you eat..

even the best of carefully screened tenants fall victim to job loss,divorce and illness.

dollar for dollar we did better in the financial markets than we did owning real estate over looking central park because the costs are so high in real estate..

one bad tenant can blow 4-6 months of rent in non payment and legal fees for eviction.

the thing about financial markets is they always recover and all ships rise and fall with the same tide. unless you take on individual company risk your funds will always turn out okay as long as you have the time .

real estate is more akin to taking on that individual company risk with one additional huge risk. while you can sell a stock that fell on hard times at any point short of going out of business you may not be able to get out from a property at any price and that makes it very very risky.

unlike the stock which cost you nothing to hold , that property can cost you a small fortune with little hope of getting out from under it short of walking away.

yes, big money can be made in real estate but it can be lost too in a big way.

there is nothing wrong with having millions invested in a diversified portfolio. we have 7 figures invested and don't think twice about it, never did .

Last edited by mathjak107; 06-04-2013 at 02:55 PM..
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Old 06-05-2013, 02:42 PM
Location: Los Angeles (Native)
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Good points. You mention the tenant that can blow 4-6 months, sounds like this is NYC maybe since you mentioned Central Park.. New York seems like one of those cities where tenants rights are very strong. Also I would think evictions would be more the exception then the rule.

You mentioned that if you have time you can wait for financial markets to recover...same can be said for real estate as we are seeing. Prices in many areas are back to or above what they were before the crash.

Also what happens if one plans to retire and the stock market decides to crash then...?

At least with real estate you have cash flow from rents . Rents usually don't go down much or at all when real estate goes down.

More people have lost money in the stock market doing it "the right way" than they have investing in property "the right way" .

It's just riskier and the returns are not as high...
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Old 06-05-2013, 02:57 PM
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if you are structured correctly a big down turn in the market is not even an event even near retirement..

when you buy volatile assets you need to buy time too. even at 65 you have money that is not going to be used to eat for 20-30 years . that is the money that goes into equities as you approach retirement.

we are retiring next year, we structured in preparation 6 years ago. even another down turn would not effect things as that invested money has a 15 year time frame until it is called upon for spending.

bonds, income funds , reits and short term cash instruments do the heavy lifting until that point.

our plan calls for not having to sell equities for at least 15 years out . we can rebalance and beef up cash though anytime markets are up.

in fact the only people that lost money to date are those that did the wrong thing since markets just broke new highs.

it has nothing to do with the amount of money you have either , the structure is all based on your own personal amount.

they either tried to timed things , dabbled in individual issues and took on individual company risk or they planned badly.

you could have done nothing the last 30 years but sat in an s&p 500 fund and made money . not that it would be a balanced investment plan but the point is you couldn't have lost a thing unless you bailed at the wrong time.

it is only bad planning that destroyed peoples plans not bad markets. bad markets are not a problem if you plan correctly. you should not try to rule out black swan events and bad markets, rather you allow and plan for them.

a simple mix of 25% each in equities , gold, long term treasuries and cash has returned over 9% cagr for almost 40 years now with only 3 down years.

it allows for bad markets and profits even during them.

that is only one of many examples of decent planning. many times good planning is not about growing richer ,but it is about not growing poorer. whether by inflation , world events or markets . good planning should never leave you devastated by some scenario.

Last edited by mathjak107; 06-05-2013 at 03:17 PM..
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Old 06-07-2013, 11:47 AM
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Originally Posted by dazzleman View Post
It's surely not enough to retire on at a young age. Even if you just live off the interest, the real value will decrease with inflation. Retiring in your 30s on only $1 million would be a very foolish thing.

But it is a big deal to hit that milestone.
ITA. I'm not 30 yet but it would be a huge deal whether I make 1 mil a year or that was my net worth.
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