$500,000 in cash. What to do.

[Mark H.]

I have yet to purchase any rental property. I have made my money overseas from savings. I do like owning some stocks, but I now want to diversify into real estate. I have $500,000 in cash. I do not want to rush in to getting any properties before I understand alot more than I currently do. With that being said, if you had $500,000 in cash, would you buy properties in cash, or finance? I am mainly looking for income. I am currently in the DFW area, but wouldnt mind looking in other areas for rentals. Thanks in advance for any responses.

[Will Barnard]

Originally posted by Daniel Craig:

Instead of investing in an actual house which would take your entire 500k investment and more, you should try to buy some real-estate commodity stocks. These ETFs will increase if the housing market increase just like a normal house would during good times but is a lot cheaper.

To each is his own, but I would disagree with this. For one, buying into an ETF, you must pay the going market value rate when you buy (you can buy RE or a note secured by RE at a discount), the ETF does not provide any tax benefits or shelters like RE, and when RE goes up, you may see appreciation in both, but you have many more advantages with the actual RE. The only advantages I see in the ETF are the ease of liquidity and the fully passive nature it is.

Ziv Magen - Regarding zero leverage, while we all are entitle to our opinions, I personally believe ignoring the advanatge of leverage is not the wise thing to do regarding RE, just as abussing leverage is not a wise thing to do. Some of the people you mentioned who lossed their life savings over "speculative assumptions" are not wise investors in my mind. You have so many options in RE including the ability to buy at discount, apply leverage responsibly (keeping adequate reserves and cash flow) and retain additional advantages through leverage such as tax deductions and increased cash on cash.
Again, I do not support complete speculative assumptions in RE investing nor do I support poor choices in leverage.