Real Estate vs Stock Market - Are we wasting our time here?

Question

Which is better and why?  Grabbing some popcorn fo this thread.

https://www.longtermtrends.net...

Russell Brazil · Answer

I try to stay about 50/50 in stocks and real estate. I average about 8% in stocks and 23% in real estate.

Osazee J Osagie · Answer

Here we go again.... grabbing my popcorn too....RE hands down win ....unless congress start chipping away at RE benefit e.g depreciation etc

Andre O. · Answer

My strategy has always been real estate first. Particularly doing it the Dave Ramsey style and paying in cash. From there large piles of expendable cash could be thrown into other investments which may include the stock market.

In reality, the markets changed. My strategy and execution followed. Have neither done the real estate or stock market play just yet. Being adaptable is important.

The approach I’ve taken is to plow capital into treasury bills. Not only does it cover my rent, but it has given me the optionality to explore living in different locations. This was at 4.9% yield which reached maturity a few days ago.

Plowing it all back again into treasuries this week for a 26-week duration. Expecting 5.4-5.5% this time around.

- More than covers rent 2/1.5/1 car garage

- Provides optionality

- Zero time/mindshare to re obligations

- Peace of mind regarding stock market volatility

- Allows complete focus to continue current cash-flowing business, while cofounding company #2.

Sharing the above to demonstrate it’s different for everyone. There is no black or white answer. Focus on what drives the most impact for your particular case.

This could even be working on your career and furthering your education. An opportunity earning low-mid-high 6 figures annually has a way of making other decisions irrelevant. Focus on what moves the needle for you, your risk tolerance, and the life you would like to live.

Steve Vaughan · Answer

Joan and John Q Public are better off with broad market index funds/ etfs.  Period.

I did a look-back on how we ended up being 94% RE, 6% paper equities.  Full disclosure- we started with 80% mutual funds, 20% RE in our primary. I was a series-7 licensed 'stockbroker' in 1996, so entrenched in equities and knowledgeable.

By 2002 I went f/t REl.   My primary home equity in my 1 house had grown to be more like 40% of my portfolio. Aha! What if I had more of those?

In 2003, I sourced a 10 unit mixed-use REO and put $25k down on it.  What if I bought SPY instead?

I sold this building essentially last year after it provided (with work self-managing) on average $1200/mo net cf.  I'll leave tax benefits out for simplicity.

The cap gain was 3100%.  But it took leverage and work and knowledge to source, operate effectively and exit efficiently.

$25k in SPY since 2003 would have grown from $102.50 to $452 (April '22) and yields 1.44%.  So my 244 shares  would've made $85,322 for a return of 341%.  Plus 'cf' / dividends of roughly $103/mo. Not bad for no effort or knowledge.

Graphs don't factor in effort or knowledge required.   J and J Q Public should stick with what they know of and can easily do.  RE investors should also focus on what they know for far greater potential returns.

Account Closed · Answer

I wanted diversity in stocks so I had Blockbuster, Toys R Us, Borders, CIrcuit City, Compaq, Lehman Bros, Levitz Furniture, MCI-World Com, Enron, Washington Mutual, Pan Am Airlines, My Space, Netscape, Tower Records & F.W. Woolworth.I'm still waiting for them to come back. I'm convinced they will . . . someday.Meanwhile, I'm all in, on real estate. ;-)

Andre O. · Answer

I would imagine your intuition is spot on, Steve! You hit it right on the head. The above works for me personally as I am both young and single. Perhaps in 4-5 years I’ll be very much inclined to purchase a home and settle down. Maybe find a great partner/wife and decide to start a family.

Can’t see ourselves being renters at that point as there is no need. In fact, the moment the market changes I’ll switch strategies and put capital towards a paid off home. That was the plan for this year, but all of a sudden we discovered around month 2 money became valuable again.  That’s when the long-held strategy changed. What an incredible deal you uncovered! Did you know what you were in for when you purchased your current home? What a great move!A buddy of mine is in his early 30s. It’s cheaper for him to travel the world and live really well than it is to live in the states. His parents have a 5,000sq foot home in California. He visits them a few months out of the year. For the rest of the time, he’s living lavishly in Argentina, Brazil, Vietnam, Philippines, Ireland, Spain, and other places. He’s in the ecommerce business and nets about 200k annually while paying himself 4.5k monthly. This is more than enough for his needs as he’s really handy with travel mileage. Ad spend is something like 20k/month which amounts to a lot of points :-). It really does all depend on each persons unique situation.To your point — he is looking to settle down very soon as he has recently gotten engaged. I believe they are thinking of living in Europe as his fiancé is a school teacher and a college education is free from what I understood. Settling down in a home as he ages to your point, nonetheless!Hope I was able to reply to everything coherently as mobile has me scrolling up and down to reply. BP user interface on mobile has some areas of improvement here. Perhaps it would be better on the app if one exists.

Steve Vaughan · Answer

Interesting approach, Andre. I am also taking advantage of the inverted yield curve. It will eventually revert to the mean, but for now any alternate investment must be very good for me to leave 5% risk and effort-free returns.

I've heard of being a renter on purpose and letting your investment yield / interest/ dividends 'pay your rent'.

I get wanting to be mobile and unburdened when young and single but eventually with a family I don't see it being satisfactory over the long run.   Will you be flexible with this strategy as well?

It took us 14 years to pay off our current house from age 36. Even then the pmt was fixed at $1200/mo net.  Because it has a rental suite down in the corner, we are net paid to live here after all expenses- taxes, insurance, maintenance,  repairs and all utilities down to our phones, streaming subscriptions and internet.

We have roots and can't go live wherever,  but no housing expenses or landlord to answer to. That's always been my argument when I hear the young FI / minimalist camp plus 1 forever renting. Eventually we may have kids in school that need stability. You may want a dog or different paint color. Different perspective I guess.

Nathan Gesner · Answer

LOL! That's funny.

Nathan Gesner · Answer

If you truly understand how to make money in real estate investing, it will out-perform the stock market every time. The only exception would be the person that gets lucky, but using that metric you could argue that playing the lottery is a better method of gaining wealth.

And if you think someone is going to answer this question to your satisfaction in a single thread, you're a fool. Learn both investment strategies, invest your money 50/50 into each vehicle, and see what happens.

V.G Jason · Answer

Stocks because less time, more liquid, not a ton of concentration if you do it right. If you have two-three physical pieces of real estate there is a lot more at risk, lot more of time, and are 100% depending on those two houses. If you're leveraged, you're even more screwed.

With that said, depending on you are able to move, a mix of both is ideal. If you're just hitting one time bonuses or inheritance--equities is the better option--depending on how much, and how your personal situation sits.

I'm right now probably 70% equities/20% REI/10% other. I'm aiming for 50/40/10. The 40% REI portfolio will have very little to no leverage though, debt is pretty much all risk in REI don't let anyone tell you differently. You can't measure risk with an outright tool like you can in equities, you can with just the note you're paying and dependence on 3rd parties to fund the real estate for you. Don't be the slave long term.

Real Estate vs Stock Market - Are we wasting our time here?

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