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Of course people have lost money. But there is also the benefit of being able to rent out a property during a down time. I know a lot of people did this in my area during the crash.
They thought why not just rent this asset out even though I want to sell...but I don't want to sell at these low prices. By holding off a bit they have no regained their equity and they likely made some good money renting out the house too..especially if they had bought a while back.
Good point , this is why sometimes view it better to own a multifamily property..if you have a 4plex for example..if one is vacant you still have 75% of your income.
Of think about an apartment building. One can also buy an apartment building and improve it and bring up the rents and make the property more valuable.
Also there are creative strategies to get even higher than market returns. Look at Airbnb..many landlords are benefiting. They can maybe rent that unit out for $100 a night..while the market rents might only be $1000 a month.
Let's say that fourplex is in an indemand area and people are building condos or townhomes in the area.
There is the possibility to develop the property and sell high end units or sell the property for a premium to a developer.
These are just some of the advantages that one has in real estate that are absent in the stock market.
IMO, the landlords who are really making money now are the one's who went aggressive during the great recession. Rents are rising faster than any other commodity and property prices have appreciated too.
But, as Aredhel has put it, for most investing in a REIT would give one comparable returns with less headaches.
Nope, we see the potential downsides in ALL investments. Unlike you, we're not looking for a place to put our money that's 100% free of risk.
Over very long time periods, the added gains from investing in the stock market have been been great enough to make the risks involved worthwhile. Could the future be different? Yes, but the exact same ting can be said for ANY INVESTMENT!
True.
But real estate has also been around a lot longer than the modern stock market. It's been around for thousands of years.
So one could say there is more historical price data to look at in regards to real estate versus the stock market.
IMO, the landlords who are really making money now are the one's who went aggressive during the great recession. Rents are rising faster than any other commodity and property prices have appreciated too.
But, as Aredhel has put it, for most investing in a REIT would give one comparable returns with less headaches.
In L.A where prices for multifamily even during the last recession/crash were still relatively high ..it seems it was mostly the people that had bought even before that ..maybe in the early 2000s or 90s or 80s or before that were actually doing well.
I agree REITs aren't a bad idea..but it's much different than investing in real estate.
I feel like investing in REITs or perhaps the stock market in general makes more sense if you have quite a bit of cash already to put in the market and want something passive.
In other words , a 10% return is quite nice if you have $1million in the market as that is $100k a year.
But if you are like most people making an average salary you're probably lucky to put in a few thousand to invest after expenses. It's going to take a long time to get to a very long time to get to a million even with a 10% return consistently every single year.
Are your stocks doing better than your real estate..taking leverage into consideration?
We bought in the south bay beach cities three years ago, and our equity has more than doubled since then. However, that's because home values have sky rocketed. If you were to buy now, with prices so high, there's no reason to expect the same gains, and there are those that think values will actually drop one mortgage rates rise. You don't want to put all of your eggs in one basket.
True.
But real estate has also been around a lot longer than the modern stock market. It's been around for thousands of years.
So one could say there is more historical price data to look at in regards to real estate versus the stock market.
True, and that data shows that in general, real estate appreciation in most areas comes in at just a bit over inflation. Of course, if you're lucky enough to buy in an area that's about to see massively increased growth (like the southwest just prior to air conditioning becoming affordable) you can see massive gains. The flip side, of course, is that if you're unlucky enough to buy into the next Detroit, you can see massive losses. And those trends are hard to spot in advance.
Landlording (as opposed to just buying your own home) is an altogether different beast. It's active rather than passive investment, requires a degree of hands-on involvement and general handiness that a lot of people aren't comfortable with, and is very market-dependent. (Where I live, Omaha, single family homes are still quite affordable, so there's little profit to be made in renting them out unless you own the house outright - and even then, the profit is going to be small. Apartment buildings, on the other hand, can do quite well.) I'd never give someone blanket advice not to be a landlord, but I would suggest they look at their local market carefully and think about whether landlording suits their personality before jumping right in.
Of course people have lost money. But there is also the benefit of being able to rent out a property during a down time. I know a lot of people did this in my area during the crash.
They thought why not just rent this asset out even though I want to sell...but I don't want to sell at these low prices. By holding off a bit they have no regained their equity and they likely made some good money renting out the house too..especially if they had bought a while back.
Good point , this is why sometimes view it better to own a multifamily property..if you have a 4plex for example..if one is vacant you still have 75% of your income.
Of think about an apartment building. One can also buy an apartment building and improve it and bring up the rents and make the property more valuable.
Also there are creative strategies to get even higher than market returns. Look at Airbnb..many landlords are benefiting. They can maybe rent that unit out for $100 a night..while the market rents might only be $1000 a month.
Let's say that fourplex is in an indemand area and people are building condos or townhomes in the area.
There is the possibility to develop the property and sell high end units or sell the property for a premium to a developer.
These are just some of the advantages that one has in real estate that are absent in the stock market.
Yes, the down side is you have property taxes, maintenance, vacancies, and management costs (either in dollars or in time) with real estate. The other advantage is of course leverage. Interest rates on using leverage for investing are typically higher than in real estate. Real estate is a good diversifier that many investors do use either as a direct investment or through derivatives. In either way, it's an expensive investment paid for either in high management fees or taxes, maintenance, vacancies, and property management. It's competitively priced and not generally something better than the stock market is so much as an alternative to it. If it were so much better, then more people would just do real estate. It's not so people mostly use it for a tax shelter to offset other gains with losses as real estate with positive cash flows (assuming leveraged investment where there's a mortgage) is rare for the several years. Otherwise you're just looking at opportunity cost of plopping down hundreds of thousands of dollars where you could put that in another investment vehicle and see returns as real estate typically appreciates much less than stocks do.
We bought in the south bay beach cities three years ago, and our equity has more than doubled since then. However, that's because home values have sky rocketed. If you were to buy now, with prices so high, there's no reason to expect the same gains, and there are those that think values will actually drop one mortgage rates rise. You don't want to put all of your eggs in one basket.
I used to live in the south bay years back. I remember even then Manhattan beach was referred to as "Beverly Hills by the beach"
I agree that L.A and SoCAL markets are likely overheated now and it's not realistic to expect huge price increases.
I'm in what many call a lower income area to be kind and I've had people tell me I live in the ghetto also
But homes are selling for 400k or more here. I can go about 15 minutes away or so and similar sized homes are probably double that 800k or more..
But of course all real estate is local.
Before lot's of people were taking out their equity/profits from SoCAL and buying in areas like Portland..now Portland is very expensive.
Austin was cheap and now it's expensive too.
I think one should be looking for the 'next L.A" or the next portland or austin.
I think it would be crazy to expect the same gains. I suppose it's possible..but I don't imagine homes in my area going for $800k or more in the near future.
But , I wouldn't be surprised if there are parts of the country where homes are now $100k and will be $200k in the near future.
The numbers don't matter it's the return/ROI that matters.
When I look at some values in other states I always think...is L.A property really worth this many times those properties?
I've considered selling and most likely would invest in a market that doesn't seem as inflated as SoCAL but that has potential.
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