Stock Market & Real Estate Investing Case Study

Stock Market & Real Estate Investing Case Study

Dallas, TX · Member since 2017 · 52 posts · 5 votes

After a great discussion on the strategy of investing in the stock market to help fund future real estate investments, I have decided to implement this strategy for me and I plan to document my journey with everyone here.

The strategy is simple enough. Instead of saving down payment money in a checking or savings account, take that money and invest it (in my case, that will be 66% VTI, 26% VWO, and 8% VEA ETFs). Then when the account value is enough to purchase a investment property, liquidate the holdings and purchase the property. Start the cycle over.

Yes, this would be considered a very high risk investing strategy in this community, or anywhere honestly. Truth be told, I have had just as many people tell me the same thing about the risks of investing in real estate and to just stick to the stock market. It all depends on a persons risk/comfort level. I believe after crunching the numbers that in the long term (even with the ups and downs in the market), this strategy will have me much further ahead than keeping them in my savings account that yields (currently) 1.49%.

So, please ask me any questions you may have, give words of advice, words of caution, etc. I will be documenting this entire strategy from the start (I will also be using current savings account data each month because I will still keep my emergency fund in that account), and hopefully provide very detailed numbers of this strategy in practice.

Thanks to everyone who provided their input in the original discussion and who helped with numbers! Some of you will be right and some of you will be wrong, let's find out together!

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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
8y

It amazes me when people define REI investing as risky, then invest in the Stock Market...I assume because they think it isn't?

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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    8y

    It amazes me when people define REI investing as risky, then invest in the Stock Market...I assume because they think it isn't?

  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    8y

    Well I hope you didn't buy this total market stuff long on Jan 26th!

    How much of this is your investable cash, James? All of it? What does the amount represent as a % of your world?

    I started buying specific stocks at specific support levels with a little (<20%) of my idle opportunity fund cash recently. I normally don't but the recent volatility has provided more obvious opportunities. Easy peasy. Set your buy limit at this level, sell limit at that level. My last AMZN play was in on Fri, out today already to my surprise.

    But... this is nothing as a % of my world and I have more control over what I buy and at what price.  At least ETFs can be traded mid-day. Set stops and limits and don't get greedy!

  • Rental Property Investor · Raleigh, NC · Member since 2016 · 393 posts · 995 votes
    8y

    I know you asked about this topic previously, and I think it's a much better option than letting your money sit idle at 1.5%.  As in the long run I believe the market will achieve closer to 10%.

    For me there are two big things to keep in mind.  One is that the market fluctuates, sometimes wildly.  Obviously you already know this, but knowing it and experiencing it first hand are often different things.  Realize that you could potentially suffer a big loss when you are getting close to being able to afford a property.  For this reason if you need 30k for a down payment, and want an additional 10k for reserves, then I would probably want closer to 50k before I got too serious about looking for a property as you never know when a crash or adjustment like the one we had last week could potentially wipe out a good chunk of your money.

    The second thing which is also equally important, is that while documenting your progress as a form of self validation that your technique works is great, but realize also that whether you document for 6 months, or 5 years, or whatever up until you buy your first property, realize that either way it is still a very short timeline.  You might find that you gained an average of 15% per year until you buy your first home, and think this method is fantastic!  But then when saving up to buy your second house end up losing an average of 20%.  Just because you gain doesn't mean the method works, and just because you lost doesn't mean the method doesn't work.  If you play around in the market long enough you WILL get burned at one point or another.  However if you do it consistently enough, over a long enough period of time (A typical ~40 year investment career), then you should do very well.

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