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I mean, in the past 7 or so years, all the boats have been rising. What would your returns have been if you put them in stocks? How great was and is the risk yo

I mean, in the past 7 or so years, all the boats have been rising. What would your returns have been if you put them in stocks? How great was and is the risk you take by taking tenants versus the risk you take by buying stocks?

toomuchtodo 9y ago
You do both to diversify (equity and real estate). Having the property as a rental is very tax efficient as well (you get to depreciate a property that appreciates in value). Also, no one is going to let you leverage equity purchases with debt like you can with real estate. Disclosure: I own several rental properties to round out my investment portfolio.
- asfasgasg 9y ago
  You don't really need to do both to diversify. There is a lot of exposure to real estate in the stock market (rental companies + commercial real estate + construction), and REITs can be used to gain more exposure if desired.
  - toomuchtodo 9y ago
    I can manage my real estate risk better (IMHO) in a rising interest rate environment better than a REIT can (and I find most REITs to be overvalued, specifically O). My cash on cash returns are better as well.
    - curuinor 9y ago
      Yeah, but can you diversify by location better by yourself than a REIT? Lots of cases of individual cities and neighborhoods going to pot while the rest of the nation and world prosper
      - toomuchtodo 9y ago
        My goals differ from a REIT slightly in that I want a quality return on investment, but also want to be able to live in my properties around the world as time permits (I’m a remote worker). Returns vs utility is an acceptable trade off for me.
briandear 9y ago
With stocks you don’t get leverage. Cash on cash return on real estate far exceeds stocks. If you put $20k down on a $100k house and you profit $300/month, that’s $300/month on a $20k investment, NOT against a $100k investment. That’s 18% per year not counting the equity as well as (possible) capital appreciation. Not to mention the tax advantages due to depreciation. Stocks are nowhere close. If you have a property manager charging 8% of the rent, you then have a cash flowing asset with almost zero hands-on work.
- curuinor 9y ago
  But the article does note that there's a gigantic subsidy on the leverage for stupid reasons, and the huge amount of leverage is obviously and empirically dangerous.

toomuchtodo 9y ago

You do both to diversify (equity and real estate). Having the property as a rental is very tax efficient as well (you get to depreciate a property that appreciates in value). Also, no one is going to let you leverage equity purchases with debt like you can with real estate. Disclosure: I own several rental properties to round out my investment portfolio.

asfasgasg 9y ago
You don't really need to do both to diversify. There is a lot of exposure to real estate in the stock market (rental companies + commercial real estate + construction), and REITs can be used to gain more exposure if desired.
- toomuchtodo 9y ago
  I can manage my real estate risk better (IMHO) in a rising interest rate environment better than a REIT can (and I find most REITs to be overvalued, specifically O). My cash on cash returns are better as well.
  - curuinor 9y ago
    Yeah, but can you diversify by location better by yourself than a REIT? Lots of cases of individual cities and neighborhoods going to pot while the rest of the nation and world prosper
    - toomuchtodo 9y ago
      My goals differ from a REIT slightly in that I want a quality return on investment, but also want to be able to live in my properties around the world as time permits (I’m a remote worker). Returns vs utility is an acceptable trade off for me.

briandear 9y ago

With stocks you don’t get leverage. Cash on cash return on real estate far exceeds stocks. If you put $20k down on a $100k house and you profit $300/month, that’s $300/month on a $20k investment, NOT against a $100k investment. That’s 18% per year not counting the equity as well as (possible) capital appreciation. Not to mention the tax advantages due to depreciation. Stocks are nowhere close. If you have a property manager charging 8% of the rent, you then have a cash flowing asset with almost zero hands-on work.

curuinor 9y ago
But the article does note that there's a gigantic subsidy on the leverage for stupid reasons, and the huge amount of leverage is obviously and empirically dangerous.