Real Estate Sucks Less Than the Rest

One thing you will never hear Jason Hartman say is that real estate is a perfect investment. Why should it be? We’re an imperfect species on an imperfect planet. The question to ask is what asset performs better? The answer, apparent to any clear-minded individual who is being honest, is real estate in the form of income property investing.

It’s a comparative thing. Let’s go over the options.

Precious Metals

Gold and silver bugs ‘round the world have been chanting the “buy precious metals” mantra for a while now. If real estate didn’t exist, we’d agree. It’s better than stocks or bonds. The problem with precious metals, when compared to real estate, is you can’t leverage the purchase, thus your money doesn’t go as far. Try this fun little exercise. Call up your friendly gold dealer and tell him you want to put 20 percent down on the purchase and he’ll loan you the rest - just like a real estate mortgage. And then you’d like him to find someone to rent the gold from you while you hold it - just like an income property. Good luck finding that. The other problem is that, if you’re injudicious enough to stash your treasure in the house, a robber could knock you in the head and take it. Bad guys have a tougher time stealing your real estate.

Stocks

All of the problems we just mentioned with precious metals apply to the stock market as well. You can’t leverage it (past a certain controlled extent known as margin) and can’t rent it out. But stocks bring along a whole new set of issues as well. If you pay any attention at all to the business news, you know what we’re talking about. When you buy stock you’re purchasing a piece of a particular company, and there’s a good chance that particular company might have problems that affect the stock price and your ultimate return.

We’re talking about labor problems, lawsuits, litigation, regulation, manufacturing, insider trading, incompetence. The list could go on. And don’t forget wonderful names from the recent past like Enron and Bernie Madoff. Worse, since stocks make you an indirect investor, you don’t feel all this chaos until you take a look at your Return On Investment at the end of the year and it looks crappy.

Real estate is not a perfect investment but it sucks less than the rest. (Image: Flickr | stevendepolo)

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