Real estate has historically performed worse than stocks (San Francisco, Williams: rent, loan)

[silverkris]

Originally Posted by Ultrarunner

Never had a piece of Real Estate become worthless... wish I could say the same for stock.

As I said... I admire those that can do it.

And I admire those who can do well in real estate - because it's too tempting for many in RE to get overleveraged, buy too much, then lose it when the RE market tanks. I've seen this way too often.

OTOH, I also know of a very prominent realtor in Sunnyvale who retired early, lost a bunch of money playing the stock market, and went back to selling houses.

Maybe the guideline for any investment class is to be disciplined, don't get greedy, and work at what you know best. Applies to stocks as well as real estate. You seem to be pretty well astute with your real estate and I commend you on it.

[sliverbox]

It doesn't matter whether we're talking real estate in the Bay Area, Arkansas, or the Moon. If you take all of the averages you aren't going to be able to outperform the general stock market. Pretty much cut and dry.

But if I were for some reason to entertain the notion of buying real estate to invest in, I wouldn't even think about anywhere near the Bay Area. I'd buy where lots of people are moving, the cost to buy is less, and thus the cash flow is more instant.

For example, back home My parents bought 2 houses. One for $75,000, the other for $46,000. They rent for about $1,000 each on average. So in other words the things are already returning and a LOT larger of a percentage of a return than any house in the Bay Area will. Would I buy in the Bay Area as an investment. Heck no. But NC, TX, GA, or some of the other states where the economy is generally doing well and people are moving to? Probably.

[Ultrarunner]

The common refrain regarding Real Estate is location, location, location.

A contractor friend was from a small town in Nebraska... farming community.

When he grew up it had a main street, stores, restaurants, post office and two banks...

With the mega farms the population keeps declining... even the Post Office is now gone.

On one visit, he bought the old city hall and school for $9,000... he is renting it for taxes to a guy that is on E-bay...

The point is California has often kicked the the trends...

Who knows... the home I bought in 1983 for $11,500 and saved from condemnation could someday be worthless... but, then so would everything else.

[Mack Knife]

Originally Posted by sliverbox

It doesn't matter whether we're talking real estate in the Bay Area, Arkansas, or the Moon. If you take all of the averages you aren't going to be able to outperform the general stock market. Pretty much cut and dry.

But if I were for some reason to entertain the notion of buying real estate to invest in, I wouldn't even think about anywhere near the Bay Area. I'd buy where lots of people are moving, the cost to buy is less, and thus the cash flow is more instant.

For example, back home My parents bought 2 houses. One for $75,000, the other for $46,000. They rent for about $1,000 each on average. So in other words the things are already returning and a LOT larger of a percentage of a return than any house in the Bay Area will. Would I buy in the Bay Area as an investment. Heck no. But NC, TX, GA, or some of the other states where the economy is generally doing well and people are moving to? Probably.

The flaw there is that most of those places have a lot of room to grow which is good for those moving there, bad for anyone thinking of investing in real estate.

If you are investing in real estate, you buy when you can in places where monies people go and where is there is no place to grow. That ramps up the price of the real estate regardless of else happens. There will always be people wanting to live in California.

So the thread was about stocks vs real estate. No one brings up buying wisely. It is far easier to buy wisely in real estate than pick good stocks. In real estate, simply buying in SF for example, more or less is a guaranteed out perform of most stocks.

A stock sits there. Real estate gives you options that can easily make stock purchases look like a disaster.

When you add it up, stocks do not outperform real estate. There is no such thing as averages in real estate because they are as different in markets as the NASDAQ, DOW, and the international markets.

The blanket statement that stock outperform real estate simply doesn't add up.

[Mack Knife]

Originally Posted by silverkris

And I admire those who can do well in real estate - because it's too tempting for many in RE to get overleveraged, buy too much, then lose it when the RE market tanks. I've seen this way too often.

OTOH, I also know of a very prominent realtor in Sunnyvale who retired early, lost a bunch of money playing the stock market, and went back to selling houses.

Maybe the guideline for any investment class is to be disciplined, don't get greedy, and work at what you know best. Applies to stocks as well as real estate. You seem to be pretty well astute with your real estate and I commend you on it.

There is a big difference. The thread is stocks vs real estate and thus investments "paid for" not acquired with loans.

If the company goes bankrupt, you are out. If the housing market tanks, you simply hold it, it always recovers. That is why it is called real property. Stocks are a piece of paper with no inherent value. It can go to zero in a single day. Real estate can't go to zero. Of course I am commenting in light of the original thread.

If we go beyond that to leverage, herein comes the rest of the story. Take your stocks and leverage them. The stock tanks and not only are you done with that investment, you now owe money on another for which you have nothing to liquidate.

Even if the real estate market crashes and you leveraged the house, there is still something to sell off. You might still be under water but never 100% or more as with a stock.

[sonarrat]

Originally Posted by Mack Knife

There is a big difference. The thread is stocks vs real estate and thus investments "paid for" not acquired with loans.

If the company goes bankrupt, you are out. If the housing market tanks, you simply hold it, it always recovers. That is why it is called real property. Stocks are a piece of paper with no inherent value. It can go to zero in a single day. Real estate can't go to zero. Of course I am commenting in light of the original thread.

If we go beyond that to leverage, herein comes the rest of the story. Take your stocks and leverage them. The stock tanks and not only are you done with that investment, you now owe money on another for which you have nothing to liquidate.

Even if the real estate market crashes and you leveraged the house, there is still something to sell off. You might still be under water but never 100% or more as with a stock.

This is too simplistic. If you own shares of a company that has a large amount of capital equipment, hard assets, or cash in the coffers and little in the way of liabilities, then you own that by proxy. If you know what you're looking for, you can even own it at a significant discount to what it's actually worth on paper. You also have a certain amount of voting rights in how those assets are managed. You can also own portions of companies that own large amounts of real estate and, in so doing, have your own rich portfolio of income and investment property without having to shoulder all of the costs and burdens on your own.

There's a huge value in stocks to someone who doesn't have the time to mess around with the upkeep and hassle involved with real estate. Count me as someone who likes the idea of investing in it, but doesn't want to make it a second job, a la Ultrarunner. You just have to be wary of what you are buying.

[silverkris]

Originally Posted by Mack Knife

There is a big difference. The thread is stocks vs real estate and thus investments "paid for" not acquired with loans.

If the company goes bankrupt, you are out. If the housing market tanks, you simply hold it, it always recovers. That is why it is called real property. Stocks are a piece of paper with no inherent value. It can go to zero in a single day. Real estate can't go to zero. Of course I am commenting in light of the original thread.

If we go beyond that to leverage, herein comes the rest of the story. Take your stocks and leverage them. The stock tanks and not only are you done with that investment, you now owe money on another for which you have nothing to liquidate.

Even if the real estate market crashes and you leveraged the house, there is still something to sell off. You might still be under water but never 100% or more as with a stock.

Well, if you hold real estate outright, and don't need the cash, you can hold it through up/down times. The problem is that RE isn't as liquid as stocks. You can't sell off RE as readily as stocks, and in a really down market (e.g. there's a lot of foreclosed properties, poor demand, etc.), if you need to sell it, it will take a long time to unload, whether it's underwater or not. So there is a difference in liquidity, and that could be a real make/break factor for some.

In any case, with any investment - don't bit off more than you can chew.

[Ultrarunner]

Liquidity is the Achilles heel of Real Estate and even more so today...

Seemingly simply transactions can go astray for the most insignificant reasons and 4 to 6 weeks is considered lightning fast.

I have nothing against Stocks other than my own less than stellar experience... still have a brokerage account I opened at age 22... bet they wish I would just close it.

[checkup]

The ppl boosting real estate over "stocks" seem to think that trading stocks involves picking them 1 by 1 and holding, hoping that you picked the right one, or two, or a few more. That's not the way to invest. You pick out portfolio's of at least 50 stocks (and preferably other types of assets) covering all sectors of the economy. Unless the whole economy tanks--which did happen a few years ago because of the REAL ESTATE BUBBLE--your "stocks" aren't going to go to zero or even close. It's called diversification and it's how you get market returns. Using this strategy, you should get a bit more or a bit less than market returns. Any 401k, mutual fund, or portfolio worth its salt is going to be composed of hundreds or thousands of different asset classes. These days, ETFs are also extremely popular as they allow diversification and broad market exposure

[Ultrarunner]

I've owned a total of eight stocks over the years with several going into oblivion or close... Coleman was one, LDP another and one I can't remember a few miles from my house plus Pizza Time Theater... all went bust of close.

Company 401k had consists of 8 funds with about a 2% cost per year to own... I stopped contributions in 2006 when employee match stopped and was burned a couple of years earlier to the tune of loosing $12k because ownership changed and I was not fully vested...

The only winner stock I owned was apple back in 81-82... sold it when I needed money to buy my home... which I still have as a rental.

I had an elderly neighbor now deceased... dividends supported his retirement... BofA, IBM, Ford, General Motors... had them since the 50's...