Real Estate vs Stocks

[Anonymous]

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Anonymous wrote:I've been a landlord for 20+ years and the 1% have never applied to the DC metro area.

Correct. This area is too expensive. This is the wrong place for rental investments. Most investors here rely heavily on home appreciations to make money.

Perhaps, but there’s another rule that it’s stupid to have rental properties that are hours away from where you live. So what should people who live here do?

our rentals rents for around $1850/month and its current assess values are around $350k...so around 6% gross ROI. We collected these rentals around 2011-2013 for around $250-300k.
Just because the 1% rule doesn't apply, it doesn't mean RE is not a decent stable investment...

But it means you can earn more money investing elsewhere. Rental properties are a lot of work for something with a suboptimal return!

Considering we put down about 70k per property, or around 25%...I think it's decent return...also, we have a large amount already in the stock market and figure diversification is a sound strategy.

It’s a horrible return. You’d have 4x as much money if you’d invested in stocks

How so?

So the rental was purchased for $250k in 2012 and I put down $70k of my own money. Tenant's rent has been covering/paying for the mortgage. It's now worth conservatively about $350k, or an $100k increase in 6 years...remember I only put in $70k of my own money so that's like 142% ROI.

Has your stock portfolio done better?

The reason this is a bad investment is because you’d barely have a return except for the appreciation. There’s a decent chance your property won’t appreciate at the same rate over the next few years. You don’t want a rental property that solely relies on appreciation. You want to invest your 70k and have a monthly income from it.

Need to keep in mind that in 9 years, the rentals will be paid off by our tentants...we're actually prepaying so they'll be paid off in 2 more years...giving us about $120k/year gross income stream.

[Anonymous]

To the previous poster, Is this in DC Metro Area?

Not sure what the right investment for people in this area is really as both the stock market and the real estate are not very friendly right now.

[Anonymous]

Yes, this is in the DC area...2010-2013 were a confluence of extreme low mortgage rates and low housing prices. I don't believe I'll see such scenario again in my life time

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm not sure what the 1% rule is, but if you are breaking even on your rental, you are doing fine. Rentals are great for diversification because stocks can have negative returns for 15+ years. I'd invest in both even though dealing with tenants can be a pain.

In what 15-year range did stocks have negative returns? The market indeed goes up and down, but I can't recall any 15-year-long down-streak.

The other benefit to stocks vs real estate is liquidity -- you can sell you stocks/funds with a few clicks, in a matter of seconds, if you need the cash.

It took about 25 years to recover from the crash in 1929.

I wouldn't go out of my way to buy an investment property in the DC area, but OP already has the property and it's pretty much a no brainer to hang on to the property and let someone else pay off the mortgage.