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Yeah but he also says that you're better off investing in productive assets, whereas this seems to suggest that, leaving outliers aside, investing in a house is

Yeah but he also says that you're better off investing in productive assets, whereas this seems to suggest that, leaving outliers aside, investing in a house is a better investment than a company.

rogerkirkness 7y ago
Not many other assets give you direct bank 20:1 leveraged loans to buy them. And they didn't before, you can only really introduce that dynamic one time.
taffer 7y ago
> Yeah but he also says that you're better off investing in productive assets, I would regard anything that generates cash flow as a productive asset (and that's probably what Buffet's thinking, too). Unlike gold, for example, which just lies around. > this seems to suggest that, leaving outliers aside, investing in a house is a better investment than a company. A good investment is about risk as well as return, and it is not easy for the average Joe to build a well diversified real estate portfolio.
- ralph84 7y ago
  On the other hand, the average Joe has much more control investing in real estate than investing in public companies. As a minority shareholder of a public company you are completely at the mercy of management. You just have to hope there's something left over for the minority shareholders after management is done enriching themselves. As a landlord you don't get to decide market rents, but you do get to decide who you rent to, how you maintain and improve the property, etc.
  - chii 7y ago
    As a minority shareholder, you still have voting rights. And it's much easier to build a diverse share portfolio to hedge against mismanagement from any particular company. And shares tend to not require maintenance unlike real estate. But unlike real estate, shares can disappear if many companies tank. But land you own won't ever disappear unless war or catastrophic natural disasters happen.
    - ralph84 7y ago
      > you still have voting rights Your share of General Electric is 1 in 8.7 billion. For reference the odds of winning the Powerball jackpot is 1 in 292 million. And that's not even considering the companies where management issues themselves a different class of stock with 10x the voting rights.
      - chii 7y ago
        if you indeed own such a small amount, then yes, you vote is as proportionally impactful as your share. I don't see what's wrong. As for management giving themselves 10x voting rights - that doesn't just happen out of the blue. If a large portion of the shareholders decide that it's the right thing to do (by voting), then yes, it can happen. But i highly doubt that a majority shareholder would vote themselves out of control. It's quite likely that the founder is doing this to retain control despite offering to create more shares. The new buyers of said share knows this, and tacitly agree as indicated by their purchase of said share.
    - turk73 7y ago
      Voting rights in corporations for the most part are a sham. I would love it to be different, but I just toss out those silly proxy voting things, just like they want me to. I don't know any of the people and they're all assholes and the the issue they vote on are either esoteric or some kind of asinine corporate virtue signaling bs. Real estate sucks. Well, being a landlord sucks. Land can drop in value, sometimes remarkably--look at Detroit, Northern Indiana, Baltimore. Lots of places.
FabHK 7y ago
Also, one is naturally short real estate (as one needs to live somewhere), so maybe buy one house to be flat, and then distribute remaining savings across other investments.
- cinquemb 7y ago
  I would consider buying a house being long only if they bought the house cash only. And it has a negative carry (maintenance costs/tax). Probably better off being long a REIT and renting if you wanna play the investment game with housing at this point. Most people are leveraged long with that negative carry (plus interest rate payments), and on the hook for the downside risk. At this point in time, I prefer to rent somewhere cheap (at least until global housing prices comeback down from low earth orbit and wipe out most of the leveraged long negative carries like a dinosaur extinction event), and be long equity volatility and short corporate bonds.

Yeah but he also says that you're better off investing in productive assets, whereas this seems to suggest that, leaving outliers aside, investing in a house is a better investment than a company.

rogerkirkness 7y ago

Not many other assets give you direct bank 20:1 leveraged loans to buy them. And they didn't before, you can only really introduce that dynamic one time.

taffer 7y ago

> Yeah but he also says that you're better off investing in productive assets, I would regard anything that generates cash flow as a productive asset (and that's probably what Buffet's thinking, too). Unlike gold, for example, which just lies around. > this seems to suggest that, leaving outliers aside, investing in a house is a better investment than a company. A good investment is about risk as well as return, and it is not easy for the average Joe to build a well diversified real estate portfolio.

ralph84 7y ago
On the other hand, the average Joe has much more control investing in real estate than investing in public companies. As a minority shareholder of a public company you are completely at the mercy of management. You just have to hope there's something left over for the minority shareholders after management is done enriching themselves. As a landlord you don't get to decide market rents, but you do get to decide who you rent to, how you maintain and improve the property, etc.
- chii 7y ago
  As a minority shareholder, you still have voting rights. And it's much easier to build a diverse share portfolio to hedge against mismanagement from any particular company. And shares tend to not require maintenance unlike real estate. But unlike real estate, shares can disappear if many companies tank. But land you own won't ever disappear unless war or catastrophic natural disasters happen.
  - ralph84 7y ago
    > you still have voting rights Your share of General Electric is 1 in 8.7 billion. For reference the odds of winning the Powerball jackpot is 1 in 292 million. And that's not even considering the companies where management issues themselves a different class of stock with 10x the voting rights.
    - chii 7y ago
      if you indeed own such a small amount, then yes, you vote is as proportionally impactful as your share. I don't see what's wrong. As for management giving themselves 10x voting rights - that doesn't just happen out of the blue. If a large portion of the shareholders decide that it's the right thing to do (by voting), then yes, it can happen. But i highly doubt that a majority shareholder would vote themselves out of control. It's quite likely that the founder is doing this to retain control despite offering to create more shares. The new buyers of said share knows this, and tacitly agree as indicated by their purchase of said share.
  - turk73 7y ago
    Voting rights in corporations for the most part are a sham. I would love it to be different, but I just toss out those silly proxy voting things, just like they want me to. I don't know any of the people and they're all assholes and the the issue they vote on are either esoteric or some kind of asinine corporate virtue signaling bs. Real estate sucks. Well, being a landlord sucks. Land can drop in value, sometimes remarkably--look at Detroit, Northern Indiana, Baltimore. Lots of places.

FabHK 7y ago

Also, one is naturally short real estate (as one needs to live somewhere), so maybe buy one house to be flat, and then distribute remaining savings across other investments.

cinquemb 7y ago
I would consider buying a house being long only if they bought the house cash only. And it has a negative carry (maintenance costs/tax). Probably better off being long a REIT and renting if you wanna play the investment game with housing at this point. Most people are leveraged long with that negative carry (plus interest rate payments), and on the hook for the downside risk. At this point in time, I prefer to rent somewhere cheap (at least until global housing prices comeback down from low earth orbit and wipe out most of the leveraged long negative carries like a dinosaur extinction event), and be long equity volatility and short corporate bonds.