All Forum Posts by: Jack B.

I'm considering moving to St. Petersburg Florida for retirement. I am currently a landlord and would like to sell my properties where I am at (Seattle) and buy other rentals in St. P. when I move there. I'm seeing brand new construction 3 bed, 2 bath homes on Zillow with one car garage, AC, etc. for 115K. Surely these are in decent or good areas?

But what about the houses that are in the 75-85K range in St. Petersburg? They seem to be in good condition, but are they in bad parts of town? Looking at the median income and housing values in the city there, it isn't like these houses cost 75K because they are in the ghetto while the good neighborhoods are 500K and up...at least it doesn't seem like it on paper. Maybe someone in the area there can clarify.

Mother of...That has to be the worst tile job I've ever seen. You could have probably done a better job yourself, were these guys drunk?

I too suspect you found them on CL, which I am learning is just awful for finding contractors. Almost all of them are unlicensed and many seem to have substance problems. If you can get them to show up.

Those aren't flaws at all Brandon, they are your subjective opinions of flaws. Yes, I factored in tax benefits, I have owned multiple rental properties for years and know the tax laws better than my CPA did, so now I do my taxes myself in less time, with a bigger refund.

At the end of the day, your counter argument is purely subjective. None of the three points are logical arguments at all. Furthermore, claims about 1,000% returns in real estate in one year are unverifiable, and frankly, unbelievable, sorry. My numbers are easily verifiable as they are from countless studies, and very believable. Yours are not.  Actually, over the long run, real estate appreciates .8%, far less than I used in my calculations.

Furthermore, your returns in real estate will be higher than stocks in the SHORT term, but lower in the LONG term. The longer you hold RE, the lower your return becomes.

Flaw 1 in your opinion is that I get to make management decisions? lol, OK. Whatever makes you feel better about a poor investment when you look at hard numbers. Say, are any of those management decisions whether to settle or fight a lawsuit? Any of them to clean a meth lab?

Flaw 2 in your opinion, is IRR. IRR actually measures the ideal holding period. And yes, average returns do matter, because the reality is that is the amount of money you have over the long run.

Flaw 3 in your opinion, is networking. Whoopty doo? I'll take millions of dollars and a fat dividend that beats real estate over a 'network'.

You're REALLY reaching when you try to come up with "network" and "I manage" as arguments for why real estate is so great.And the longer you hold real estate, the lower your returns. You also have to factor in the opportunity cost that exist investing into such a low appreciating asset. Great, you get cash flow. Stocks have dividends too.

And to say that you can buy real estate below value. Great, you can do that with stocks as well. Ever heard of a guy named Warren Buffett? While he is the most prominent investor in stocks, like Trump may be for real estate, there are others like him. Oh, by the way, who has a higher net worth? Trump or Buffett? Buffett started with 100K. Trump inherited 200 MILLION from his dad. Buffett out earns him by so much, it is laughable.

Shhhh! You are ruining peoples emotional attachment to real estate, that as another poster pointed out, is really rearing it's head. And I love how people are claiming they are different things. OK, maybe to a biased person, but in reality, net worth and income in the long run are the same thing, regardless of what asset class you invest in. Everything has risk.

Would 100K invested in real estate in the Midwest allow one to retire living frugally? Sure. But that is not going to provide the highest returns or the most dividends/income in the long run. 

Up until recently when I started researching the two asset classes and their returns over the very long run, and started running numbers using cash, leverage, etc., I was a staunch supporter of real estate. I now see the flaw that the numbers exposed. Whether you compare using cash or leverage, the result is the same: stocks provide a FAR higher net worth, and income, with less hassle in the long run.

If you want to retire now and just have the bare minimum, buy some real estate in the midwest and enjoy. You can do that with probably 100K and using leverage.  I want the highest return on my money, however. That doesn't mean I'm going to sell all my real estate. I am still better off owning my primary residence since it reduces and fixes my cost of living. I'd even like to keep at least ONE rental. It is an advantage to be able to move back and forth amongst two houses, and be able to deduct, say, foundation repairs on the rental, that used to be a primary residence...plus I believe in diversifying, and fully intended to even when I planned on having most of my money in leveraged real estate. It's just now I will likely switch to mostly stocks and some real estate, bonds, cash, etc.

Real estate allows one to have SOME money, because there is always value in the land...so long as you pay your property taxes. :-) Then you will see who really owns that land :-)

Yes, but as the numbers above pointed out, over the long run, the benefit of real estate is not as good as stocks. Stocks would provide a higher net worth and a higher income in retirement than real estate would. Real estate wins in the short term but in the long term, it doesn't, which is what my point was. Also, I think real estate is a good strategy to use for short term, and switch primarily to stocks for long term. For example. I'd keep one rental, and my primary residence, primarily for tax benefits. But I'd cash out most of my money and put it in stocks. I'd still be able to live off that now, but in the future, not only will I have a net worth several times higher than my real estate would provide, but just the dividends alone, not even withdrawing principal would KILL income from real estate.

The numbers above point out the logical truth. Thus far I've seen a lot of emotional arguments about how I'm missing key points or what not, but the reality is that these people have not even provided a cogent argument or any facts, and are actually the ones that missed key points in my post. Just emotional arguments based on bias don't compare to the facts. Only one person has realized that the numbers above don't lie. The FACT of the matter is stocks do out perform RE in the long run, both in net worth, and in income from dividends or withdrawals.

Actually I did factor it in, you do realize stocks pay dividends as well? And if you look at the numbers I posted, the dividends of stocks are far better, because the appreciate more than inflation.

Tenants pay for them in a best case scenario. One bad tenant can make your gains disappear. One LAWSUIT can make your gains and your savings disappear.

I've been running the numbers and although real estate has been very attractive to me with leverage (I own 3 properties), running the numbers even with leverage real estate is not as attractive in the long run, because although you are earning higher CoC returns on leveraged real estate, the reality is the asset itself is eventually deleveraged once paid off, and it didn't appreciate in value as much as stocks would have over the same period. Over time, the advantage of leverage is removed, and you're left with an asset that barely kept pace with inflation. Even Seattle has been at 3-4% over the last 20+ years when averaged.

If I buy a 100K house that appreciates 3% over the long run (per study by famed economist who called the last crash, Robert Shiller), in 30 years I have 242,726.25 dollars. Not only is this a petty return, since it just keeps up with inflation, I got to pay for all kinds of repairs during that time.

Even if I Buy the house with leverage, due to the low appreciation rate, I'm still not earning that much. When you compare it with stocks:

100K invested in an index fund that earns 10% a year over 30 years, gives me: 1,744,940.22

To make it even worse, a 4% safe withdrawal rate for the actual value of what my assets would be in these two scenarios, I'm making about 900K a year in SWR eligible funds, compared to a paltry fraction of that with my real estate, which is ultimately a job. Even if we continue with the numbers for the above two scenarios, you are making $20,391 a year in profits after expenses (all rents and expenses adjusted for inflation of 3%) from the house being rented out, compared to what I could be making with the stocks $69,797

Am I wrong here? Was initially thinking real estate was the way to go, and it has certainly been good to me buying during the downturn, but I think I may be better off cashing out and putting 500+K to use in the market. Maybe not now, with the run up, but DCA over time.

@Levi F.

You buy MULTIFAMILY in Alaska for 20-60K!  A four-plex in my area is 500K! May I ask what your rents are and cash on cash return? I presume there is little or no appreciation?

No offense, but your posts are poorly thought out and make absolutely no sense at all, and you keep changing your story. First you said it's better to own leveraged properties because two vacant houses sitting empty are lost income. Great, but two leveraged properties sitting empty are also lost income, not to mention that they are huge expenses. Or did you forget to take that into account?

Then you post that you would rather have two expensive leveraged properties than two cheap paid off properties, which according to the logic of your original post, is even worse.  Did you perhaps make an erroneous statement and are now trying to justify it but are in reality digging deeper into a position that makes no sense?

Ummm...the concept is the same in that what I pointed out above as your reasoning for having leveraged properties works against you, not for you, especially since you would rather have two expensive leveraged properties rather than two cheap paid off properties.

You are just changing your scenario and comparing apples to oranges now, where earlier you made a statement as if leveraged properties are somehow immune from the same vacancy risks, and as if there is no expense there when they are sitting vacant.

Again, your original comments said that 2 paid off houses sitting vacant is lost income. Great, but the same applies to two leveraged properties and then some, since two leveraged properties is not only lost income but a lot of expense as well. Comparing apples to apples would give a better comparison of which is better.

Again, it has nothing to do with a number goal. The question is, which is better, two paid off houses or multiple leveraged houses? For sake of an even comparison, let's use the same values for properties...