Why do people have investment properties over stocks?

[Anonymous]

Anonymous wrote:I’ve owned various rental/vacation rental properties over the years and they’ve been nothing but a PITA. I’ve done far better just investing in index funds and letting the money sit there. I’d never trouble myself with a rental again.

+1

[Anonymous]

I'll ask my dad. He is 100% real estate..for some reasons he has this massive fear of the stock market. He has 2 buildings with a total of 10 bedroom apartments. He has no mortgage. After all expenses taxes maintenance renovation etc his take home is $20k. He has been living that money in various savings accounts. He won't invest. It's crazy to me.

[Anonymous]

Lock in current prices. My 72 year old cousin was out in Hamptons in 1975 on a biking and camping trip and ended up camping in Montauk point on the beach. When he graduated college he bought a plot of land out there. Small loan and he saved up by living at home two years after school

Flash forward 50 years he lives in a mansion in in Montauk. When he was around 59 after 2009/2010 financial crises and building costs low as builders had no work he built the big house

The beauty is rents, land prices, home prices keep going up but you lock in prior prices. In his case when he bult his dream home in 2010 his land price was 1977,

[Anonymous]

Anonymous wrote:Lock in current prices. My 72 year old cousin was out in Hamptons in 1975 on a biking and camping trip and ended up camping in Montauk point on the beach. When he graduated college he bought a plot of land out there. Small loan and he saved up by living at home two years after school

Flash forward 50 years he lives in a mansion in in Montauk. When he was around 59 after 2009/2010 financial crises and building costs low as builders had no work he built the big house

The beauty is rents, land prices, home prices keep going up but you lock in prior prices. In his case when he bult his dream home in 2010 his land price was 1977,

This isn’t the question though. What if he invested in the S&P over that same time horizon.

[Anonymous]

Anonymous wrote:First, assuming a 10% SPY return is optimistic. Long run it’s more like 7.5%.

But to answer your question…leverage.

You can borrow 80% of the purchase price of a rental property, so your equity return is much higher from rent, plus the increase in purchase price.

Sure, you could buy stocks on margin…but that’s a risky thing to do and most won’t do it.

Also, RE provides a hedge against stock market volatility. If you owned the SPY in 1999, it went down and didn’t come back to even until 2011. In theory, an investment property would have earned a nice return of er that time period (assuming you didn’t lose it in theory financial crisis).

This, and even 7.5% is optimistic.

[Anonymous]

I have one property and we bought it at a low interest rate. I live in a high COL area and like the idea of having a place one of my kids could live if they needed to, at cost. I have both qualified and non Qualified investments. $3.6M net worth with $1M being real estate (primary property and rental). We may sell it when our youngest goes to college.

[Anonymous]

Op, I'm with you, but I can do better. I did 100% return in my two tax free accounts last year, and I'm at 35% this year already. Previously, I had just at on my investments like suggested.
I think I figured it out how to get the high return. It's not luck anymore. People also don't understand how the heck do I do it tax free. How is this even a question when there's Roth account.
For the life of me I cannot get through to people how I do it. Most people I know, who ventured into investing, abandoned it instead of sticking to it and learning. I also couldn't get through to my family how we 'lost money' with three properties if I look what the stock market did at the same time.The properties were not needed. We just didn't know investment options at that time.
People also don't consider what they can learn in the market every single day while watching it and buying and selling. I learned nothing from real estate but to stay away. Happily renting now.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Lock in current prices. My 72 year old cousin was out in Hamptons in 1975 on a biking and camping trip and ended up camping in Montauk point on the beach. When he graduated college he bought a plot of land out there. Small loan and he saved up by living at home two years after school

Flash forward 50 years he lives in a mansion in in Montauk. When he was around 59 after 2009/2010 financial crises and building costs low as builders had no work he built the big house

The beauty is rents, land prices, home prices keep going up but you lock in prior prices. In his case when he bult his dream home in 2010 his land price was 1977,

This isn’t the question though. What if he invested in the S&P over that same time horizon.

Yap, he would have 3 mansions and money left over.

[Anonymous]

Safer than stocks.
Better than stocks.

[Anonymous]

This is not an either/or situation, but is part of a diversified portfolio. We have multiple investment instruments.

[Anonymous]

Anonymous wrote:Safer than stocks.
Better than stocks.

Not true if held long term.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Safer than stocks.
Better than stocks.

Not true if held long term.

Very true if held long term. Opposite of what you think.

Stocks always being created. Land is not.

[Anonymous]

Anonymous wrote:I'll ask my dad. He is 100% real estate..for some reasons he has this massive fear of the stock market. He has 2 buildings with a total of 10 bedroom apartments. He has no mortgage. After all expenses taxes maintenance renovation etc his take home is $20k. He has been living that money in various savings accounts. He won't invest. It's crazy to me.

LMAO. Yeah, that he admits to.

[Anonymous]

Anonymous wrote:This is why we've always been 100% in stocks that we hand-picked. Mostly Apple and other high tech that morphed into the Magnificent Seven (I shorted Tesla recently). It's gone spectacularly.

My BILs are 100% in rental properties because they don't understand the stock market. It works well for them because they know how to be landlords.

So really you should know what you're doing, OP, regardless of what you choose.

Sure everyone can pick the magnificent seven.

I mean owning Google and Apple is hardly swinging for the fences.

[Anonymous]

Anonymous wrote:We live in a TH with a rock bottom mortgage rate in a good school zone and are torn between selling it or keeping as a rental when moving up. We would get about 225k equity out of it if we sold and it would rent for around $3500/month based on comps.

The monthly cost for the house (PITI + HOA) before any maintenance is $2200. Best case scenario after dealing with upkeep and vacancies we would cash flow maybe $1000/month, but would also benefit from $850/mo principal pay down and a few % appreciation per year on a 600k TH. This looks like ~40k/yr in gains putting those three together if we assume 3% appreciation. Over 20 years time frame if we assume rent and house value grow at 3%, and all cash flow is reinvested into the SPY, the total value we are left with in the end is about $1.5M if we combine the stocks and TH equity.

On the flip side if we just sold and invested the 225k equity up front in the SPY then averaging 10% would yield $1.5M in 20 years, so pretty much the same as renting the house but with zero hassle.

It seems like this math holds true for most situations where someone has at least 30-40% equity in their house, it’s almost always better to sell the house and invest the equity in stocks. Not only do you get better returns but there’s no headache involved. Only in situations where you’re highly leveraged with very small amounts of equity is it more ideal to turn it into a rental.

So my question for the people here with lots of rental properties that are at least 1/3 of the way paid off: what keeps you from just selling and investing the proceeds in stocks? Even with all the tax deductions available for landlords I still can’t get the math to make sense.

th and condo are bad idea, HOA can make renting expensive or banned