All Forum Posts by: Steve K.

@Account Closed So you’d have to buy 12 houses that cash flow $500/month reliably. Not easy to do. In fact completely unrealistic in most areas of the country currently. Plus don’t forget closing costs on each not to mention most properties need at least a little work and additional cap ex to turn into performing assets. So much more time invested and room for error than clicking a few buttons or making a call to your stock broker. Also the tax benefits aren’t so hot when depreciation recapture is accounted for. I like RE because I can fix stuff with my hands, but if an RE investor doesn’t bring a special set of skills to the table such as being able to source discounted properties, force appreciation through sweat equity, consistently making deals like the one you described in your other post, etc., they may be better off focusing on their day job and loading up on dividend stocks. $500/month cash flow and $70k profit on a single subject to deal is not the norm. 

@Account Closed  2.92% dividend yield on top of doubling your money if you held for 10 years, with zero work on your end, isn't good enough for you? That's fine, don't invest in WFC. But that doesn't make your statement that stocks don't provide cash flow any less incorrect. Saying stocks don't provide cash flow is simply not true. Someone else might have enough WFC that they collect more than enough in just dividends to cover their expenses, and they would laugh at your headache-laden RE investments, which they could never scale big enough fast enough to cover their expenses, whereas the click of a button get's them plenty of dividend income to live off very comfortably while compounding the rest. Probably 99% of the people on here buying property they think will return $100/door are actually unknowingly losing money, while if they had bought WFC at least they'd be making 2.92% dividend yield on top of appreciation.

It takes a lot of work to build a strong portfolio of cash flowing rentals. Stocks are so much easier to acquire by comparison. On top of that, what if all of a sudden you need a new roof, or windows, or a sewer line, or the irrigation system freezes, leaks and floods the basement, or a fire guts the place and your insurance only covers some of the vacancy/rebuild costs, or a flood washes it away and you didn't have flood insurance, or your tenant stops paying and their estranged lover/stiffed drug dealer breaks in and destroys the place, or any one of a myriad possible bad things happens because you have an investment that hinges upon human behavior, and therefor needs constant baby sitting, and 5 years of your glorious $500/month is wiped out in one afternoon, and the bank takes the property? None of that happens in stocks. Sometimes companies go out of business, but look up how many aristocrat stocks have gone to zero recently compared to the number of foreclosures. 

I personally would never have been able to invest in RE if I didn't have dividend income from stock investments first because I work in sales and lenders hate fluctuating, commission-based income, even if the commissions are substantial. So for me having dividend stocks was a critical piece of getting into RE. Why do you think lenders love seeing a strong history of dividend income? Because dividend income is consistent and reliable. Arguably more reliable than rental income. Saying only one is the answer for all investors is like saying people should only invest in Pokemon, Bitcoin, or 90's baseball cards, it's just bad investing advice. 

 Look, I can't get into a back and forth argument with you. It seems you have convinced yourself that only one form of investing makes sense, and you're only going to accept data points that support your point of view, while discrediting any facts pointing in a different direction than your narrow minded beliefs. I don't think anything anyone says will convince you, which doesn't matter because you're all set with your RE investments, and kudos to you for that.

Most people agree that both stocks and RE have their advantages and disadvantages. Each strategy makes sense for someone's personal situation and individual investment goals. For the majority of people, the answer is both. In my experience most successful people, millionaires, billionaires, whatever, will have some sort of mix of stocks and RE or at least REIT's in their portfolio.

 One of the main reasons there is opportunity in rental property is because less people want to do it than investing in stocks, and there's a good reason for that. 

Wait, what? The stock market absolutely does do that for people, in the form of dividends. Many companies even increase dividends in a downturn to keep investors from selling. All you have to do is hold, ignore the rise and fall of the stock price, and collect dividends (just like shrinking equity doesn't phase you as long as the $500 rent check clears). It's no different in stocks or RE. Hold, collect rent/dividends, and you're fine. For example LMT, WFC, WMT, WU, XOM, AAPL, BLK, CA all actually increased their dividend yield during the last crash. Those invested in solid companies with plenty of cash to weather the storm collect dividends and buy more stocks at a discount. Just like RE investors holding solid properties still collect rent (although rents may go down) and if they're brave, go discount shopping. That is if they aren't suffering evictions, foreclosures, vacancies, ARM's, loans being called, the one mill in town closing, etc.

Not too mention all the short sellers who made a fortune playing the swings this week...

RE is awesome but let's not be ignorant about how the stock market works and spread bad information just because we like RE.

(Sorry for the double post, my comment got lumped in with the quote, maybe a mod can clean this up for me?) @Mindy Jensen

@Account Closed On 9/11/18 Gilead (GILD) calls tripled overnight. It happens all the time. Last January call options on the same stock soared ninefold. Successful options traders can make way more than $70k on a single deal and triple, quadruple, 10x their money with the simple click of a button. If you don’t want to believe that, you’ll just have to stay in the dark on stocks forever. It’s my understanding that most subject to deals don’t involve any instant profit for the buyer, and there are always the pitfalls of sneaky overlooked liens, due on sale clauses (with interest rates rising maybe the banks will start enforcing these and then bye bye sub 2 deals), insurance, the property being a money pit, etc. I wouldn’t call it the safest sandbox for noobs to play in. This thread has been interesting but I think your time would be better spent researching options trading. You’d  do really well. You’ve dragged us down an interesting rabbit hole with this one, I think I’ve provided enough free stock advice at this point, and I’m out. 

@Account Closed A stock doesn’t have to triple in value for an investor to triple their money. Options traders can just as easily make money on the swing. You can’t just exclude options trading from the equation because you think it’s too complicated for new investors. Swing trading isn’t any more difficult than “subject to” deals. You may think it’s complicated but somebody else might think it’s simple and find what you’re doing complicated. So let’s not make up arbitrary rules as we go, let’s keep it a fair fight. From my perspective,  options trading is the stock equivalent of subject to, except far easier to get into for the average Joe than finding the rare homeowner who is willing to let a $270k property go for $9k. It’s also easier to replicate with regularity and scale because the market is so much bigger. There’s a limited number of distressed sellers out there looking to offload quickly and perhaps take a loss at any given time. You could probably tell us how many better than me but I would guess maybe a handful in each local market if you’re lucky? Plenty of sharks circling to compete with on those deals. Meanwhile there are some 45,000 publicly traded companies listed over 200 exchanges worldwide that options traders have to choose from. All those stocks went up and down over the last 30 days and swing traders could have tripled their money on any of them both rising and falling. Others bet wrong and lost money, just like in RE, as evidenced by the parties on the other side of your deals. 

3) Stocks don't have to go up to make money on them. Heard of short-selling?

@Account Closed 1) Yes you could lose money 2) Yes stocks have tripled in 30 days. Many, many times. why would you doubt there are anomalies in stocks, just like your deal is an anomaly in RE?

@Account Closed Okay just go buy these 10 stocks right now: XOM, NATH, BAC, NTRI, ROKU, BC, PFE, VMI, AEO, UPS.  Buy low sell high. 

Options trading and penny stock investing require literally pennies to get started in, and have minted many Millionaires. Margin loans are similar to mortgages but with much less interest. There are ways to get started in stocks with less money than 99% of real estate deals. 

Trading options or investing in penny stocks certainly aren't the most common strategies, or ones recommended for everyone, but then again subject to deals aren't that common either. 

With $10k or $25k you could cherry pick some sweet blue chips. Some of them will do down and a handful will smash your deal. Pick those ones. 

My serious advice would be to pick up some Vanguard or SPY high dividend yield ETF's and hold forever. 

@Account Closed Thanks for furnishing us with the sincere position of your polemic. Noble of you to steer the Lurkers down a path which you can verify leads to success. However I besiege you; don't undermine the ability of these same readers to have even greater success investing in stocks.

If I may borrow your audience for a moment, I would caution them to be wary of dubious rhetoric which states they don't have enough time left to invest in stocks, and that REI is the only way. If you look at both REI and stocks with reasonable knowledge of the many strategies endemic to each, you will see that there are actually fewer barriers to entry and more paths to success in stocks than REI, as well as fewer pitfalls. No income, no credit, no down payment, no patch of dirt, no problemo amigo.

By using the right strategies, beginning investors can get in on stock trading with less time and money than it takes to enter REI, and start building real wealth quicker. Options trading for example is actually similar to what you're doing in the way that the objective is to buy the stock for less than it's current market value, and you can buy and sell contracts, but it can be much more profitable much quicker if executed well. Just think of it as the stock market version of "subject to", except almost infinitely scalable. You did $70k in 12 hours, and that's awesome, but why not also do $7M in 2 seconds? (But I don't mentor and I don't coach.)

Your rags to riches story is heartwarming but pales in comparison to that of Chris Gardner, Phil Falcone, Glen Dubinn, Suleiman Kerimov, Philip Anschutz, and many others who went from extremely poor to extremely rich quickly using stocks with just a small side of real estate.

 If you lived on Wall Street instead of Central Ave., you might be having lunch with one of those guys tomorrow. Maybe you'd be dining on tartare and foie gras in Phil Falcone's 27 Story Upper East Side apartment worth a cool $50M (he also has a $40M villa in St. Barts). Phil started investing with absolutely nothing and became worth $2B within a decade. Who's to say one of these Lurkers of which you speak isn't the next Phil Falcone? 

REI has worked for you and that's great, but the aggressive claims about stocks are unwarranted. Different strokes for different folks, man!

In another life, I could see you being a great corporate raider, a master of mergers and acquisitions, a junior junk bond trader with humble origins who rose to command a massive hedge fund empire, amassing $Billions$ of dollars and owning whole city blocks of Class A apartments just for your personal residence, in addition to a private island in the Caribbean. But you chose REI, with nary a small side of stocks, and whether you're richer or poorer for it, the world will never know.