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Rich people invest in property because they have enough money to view a million dollar condo as a diversification strategy. Property can be a good investment, b

Rich people invest in property because they have enough money to view a million dollar condo as a diversification strategy. Property can be a good investment, but shouldn't be your only investment.

sidlls 9y ago
I'd take 10 houses for $200k in the Midwest over one $2m house in the Bay Area. Appreciation is lower, but rents (as a percentage of cost) are much, much better. The shortfall in appreciation can easily be made up for in better rent yield.
- sanswork 9y ago
  How does it look once you account for closing costs on 10 houses, maintenance and management of 10 rental properties, etc?
- jeffdavis 9y ago
  Consider maintenance costs, vacancies, and management fees. Those can take a huge bite out of your rental income and easily drive you into the red.
  - walshemj 9y ago
    not if you run it as a property company and not directly own them
    - jeffdavis 9y ago
      Can you please explain?
      - walshemj 9y ago
        You set up a company who owns the property's you can then claim expenses back against tax - you then pay your self a dividend. As opposed to you owning the houses directly
- inuhj 9y ago
  Less desirable areas always have higher cap rates. Most investors are NOT looking to make money on the cap rate though. If you're seriously investing in real estate you're looking into development projects, re-zoning, etc. You're buying because you know the local government has a 10 year plan to revitalize that part of the city or some other strategic bet.
  - sidlls 9y ago
    True, but I think the context here is people buying one (or a very small number) of single family homes as an "investment." My point is that to "invest" that way in a high cost area is not the smartest move. It's better to buy conservative dividend paying stocks. But if one must "invest" in property it's better to buy 10 for $200k than 1 for $1M. I also didn't mention risk mitigation: the risk of loss on the former is lower.
  - prostoalex 9y ago
    > If you're seriously investing in real estate you're looking into development projects, re-zoning, etc. I don't think that's strictly accurate, there's something for every budget in real estate investment world, from buying a small condo to rent out to sovereign-fund-level buildouts like Las Vegas CityCenter or LA Metropolis. It's like saying that someone interested in stock investing would not be buying a few shares here and there, but instead go the Warren Buffett way and acquire entire companies to get synergies across industries. There are income-oriented investors and multifamily income funds who buy primarily for cap rates.

Rich people invest in property because they have enough money to view a million dollar condo as a diversification strategy. Property can be a good investment, but shouldn't be your only investment.

sidlls 9y ago

I'd take 10 houses for $200k in the Midwest over one $2m house in the Bay Area. Appreciation is lower, but rents (as a percentage of cost) are much, much better. The shortfall in appreciation can easily be made up for in better rent yield.

sanswork 9y ago
How does it look once you account for closing costs on 10 houses, maintenance and management of 10 rental properties, etc?
jeffdavis 9y ago
Consider maintenance costs, vacancies, and management fees. Those can take a huge bite out of your rental income and easily drive you into the red.
- walshemj 9y ago
  not if you run it as a property company and not directly own them
  - jeffdavis 9y ago
    Can you please explain?
    - walshemj 9y ago
      You set up a company who owns the property's you can then claim expenses back against tax - you then pay your self a dividend. As opposed to you owning the houses directly
inuhj 9y ago
Less desirable areas always have higher cap rates. Most investors are NOT looking to make money on the cap rate though. If you're seriously investing in real estate you're looking into development projects, re-zoning, etc. You're buying because you know the local government has a 10 year plan to revitalize that part of the city or some other strategic bet.
- sidlls 9y ago
  True, but I think the context here is people buying one (or a very small number) of single family homes as an "investment." My point is that to "invest" that way in a high cost area is not the smartest move. It's better to buy conservative dividend paying stocks. But if one must "invest" in property it's better to buy 10 for $200k than 1 for $1M. I also didn't mention risk mitigation: the risk of loss on the former is lower.
- prostoalex 9y ago
  > If you're seriously investing in real estate you're looking into development projects, re-zoning, etc. I don't think that's strictly accurate, there's something for every budget in real estate investment world, from buying a small condo to rent out to sovereign-fund-level buildouts like Las Vegas CityCenter or LA Metropolis. It's like saying that someone interested in stock investing would not be buying a few shares here and there, but instead go the Warren Buffett way and acquire entire companies to get synergies across industries. There are income-oriented investors and multifamily income funds who buy primarily for cap rates.