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real estate is leveraged and if bought with borrowed money that is akin to buying stocks on margin . you can lose more than you invested in both cases.
just like owning the s&p 500 index ,that fund will never be worth zero and you certainly can't lose more than you put in so loses are not unlimited . . it may fall by 50% but so has real estate in places .
only difference is real estate is local and your market may never come back where the index's are world wide and not location dependent .
we sold our house in the pocono's in 2012 . today it still is worth way less .
My point being the probable downside risk of land/real estate vs. stock. Company stock can become worthless; S&P downside was market crash. Downside risk is worse case scenario; not relative gain.
Yes, there can be other mitigating factors such as leverage, rental income, lost opportunity cost of money invested in stock. So maximum loss in stock must include the lost opportunity cost of the cash as well. But those factors aside, land is finite so even worse case, house burns down, there is residual value of the land.
any time you buy an individual stock you are speculating in my opinion and not investing .
i speculated in real estate . i bought in to a venture that bought up rent stabilized co-op apartments over looking central park . i speculated that many of the tenants would not be able to live there once they retired and a 100k buy out offer for their leases would be enticing .
it was a speculation . if i was wrong those apartments are only worth cents on the dollar . if i was right they were worth 7 figures .
so betting on the outcome of one stock is speculating . betting on the out come of some types of real estate ventures can be speculating as well .
today we have 2 apartments left out of 9 . those two are worthless to us as we can't sell them because 1 has a 26 year old son with succession rights and has a slight rental loss . the other is salable as the rent is at a slight profit but we wont sell that one without the other .
so basically they are worthless to us . no income and we can't sell them . but the deal was so profitable overall we can gave them away free and it would not change things much ..
we are hoping the son accepts our offer. we are offering him the apartment at 50 cents on the dollar if he buys , we will finance and no money down .
There is financial security in owning land and real estate with limited downside risk vs. stock with unlimited downside risk.
there's emotional security.
a residential property will *never* go to $0 (even a dump has some modicum of land value in the most-depressed areas). But there are a few factors that might FORCE you to sell at a loss.
a "blue chip stock" will similarly *never* go to $0 (incredibly small chance of doing so; the company would be sold first, or you'd have more control over when you sell - there's a ready and liquid market for that asset).
As long as I pay my mortgage, or have it paid off and generate enough income for the property taxes, I have absolute knowledge and safety of what my shelter - a basic need - is.
If something happened worse than 2008 whereby literally the financial markets collapsed and our country ceased to exist, then I'd have to work longer to save more to retire eventually.
I have no doubt that the emotional affect of the singular line item SALT cap is having a significant effect on people's housing mood. Until they file their taxes for 2018, all people can go on is "OMG, my bill is 28K so now I'll have to pay taxes on 18K of it!" ... without any associated calculation of other tax deductions, brackets or rates that are moving in their favor.
And even if they didn't realize ANY benefit from the others, they just think 18K, they don't think 4K (25% effective rate).
I was employed by a Fortune 500 company that filed for bankruptcy; matching company stock in 401(k) worthless. The dot.com bust is littered with large companies that went bust. What if you are not in a position to get employment? Age discrimination, not to mention if someone is disabled, retired, etc.
Could someone buy real estate in anticipation of Amazon relocation there and lose? I am not referring to anecdotal cases.
In general, the value of land provides a buffer to downside risk in real estate.
this is why i said buying INDIVIDUAL STOCKS is speculating not investing .
you are hoping to buy just the right stock at just the right time in just the right sector ,in just the right market sentiment . even if you get all the right you still need to know what the competitors have on their drawing boards and that does not mean the company directors are not perpetrating fraud . .
but buying diversified funds and index's is a whole other thing. i have been buying fidelity funds since the 1980's and they have performed just fine through crashes , wars , the greatest financial collapse since the great depression .
all investing has it's risks . 2008 saw many many homeowners lose their homes and also walk away from rental properties losing all they put in and in fact more since in recourse states they owe all they borrowed too . .
Last edited by mathjak107; 10-27-2018 at 09:41 AM..
I have no doubt that the emotional affect of the singular line item SALT cap is having a significant effect on people's housing mood. Until they file their taxes for 2018, all people can go on is "OMG, my bill is 28K so now I'll have to pay taxes on 18K of it!" ... without any associated calculation of other tax deductions, brackets or rates that are moving in their favor.
And even if they didn't realize ANY benefit from the others, they just think 18K, they don't think 4K (25% effective rate).
I am not clear on your conclusion. Coming from a SALT state, we greatly benefitted under the former tax code. We were able to deduct high state and local taxes on earnings, very high property taxes on multiple properties. Under the new tax law, one property tax bill and we max out the $10,000 cap.
this is why i said buying INDIVIDUAL STOCKS is speculating not investing .
you are hoping to buy just the right stock at just the right time in just the right sector ,in just the right market sentiment . even if you get all the right you still need to know what the competitors have on their drawing boards and that does not mean the company directors are not perpetrating fraud . .
but buying diversified funds and index's is a whole other thing. i have been buying fidelity funds since the 1980's and they have performed just fine through crashes , wars , the greatest financial collapse since the great depression .
all investing has it's risks . 2008 saw many many homeowners lose their homes and also walk away from rental properties .
But their properties were not worthless; they may have been over leveraged. Again, it confusing concepts.
you are playing with semantics . when you lose your money by walking away for all purposes , yes IT IS WORTHLESS TO YOU.
it is like saying the company stock you had that was worthless was not worthless because the creditors have assets they can take back from the company.
when one's money is gone and you relinquish the asset you lost , what is left is worthless to you once they foreclose .
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