Should I sell my house or rent it out?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Take it and invest it. After investing for 20 years at 6% interest, your initial investment of $650,000 will have grown to $2,084,638 with literally ZERO outlay on your part. Meanwhile, that house in Reston will have property taxes, repairs, etc. and even if it's paid off will absolutely COST you money year over year.

Isn't her house paid off and she will make rental income? Your scenario assumes the house only carries costs and appreciate with inflation if at all. She can take rental income and invest it in the markets. She needs to calculate how much rental income she will net and compare with the performance of her market investments. She isn't likely to do better in the markets than she is already doing, because this assumes re-education and for her to change her strategies.

Another question to ask is whether she wants to pass the house on to her kids. She needs to do the numbers, that's the bottom line. Also, it is beneficial for her to sell and not pay cap gains tax on her appreciation now before it gets rolled over into a rental property. But then she gets to deduct expenses of rental maint. from her income as well as depreciation. Depending on her income bracket she may get tax breaks and invest the money she would have had to pay in taxes each year.

What you say (cash out, pay no tax and invest the whole 600+K in the markets that will continue growing steadily with a rather high rate of 6% and with no risk) sounds tempting and convincing, but I don't think counting on markets consistently returning this for the next 2 decades is realistic. You are looking at the past performance, but then the same rule has to apply to housing market where properties keep appreciating. Yet we don't believe this will continue and believe housing prices may actually drop or barely keep up with inflation. What makes you believe markets will keep rising in that scenario?

The stock market consistently returns 7%+ over time. So as long as you take it out of market a few years before you actually fully need it you should be good....market is the simplest way to get a good return. Much less risky than a rental house, especially one that's older and will need work. What if you go 3 months between renters, then your profits for the year might be gone.

Consistently since what time? What happens during market crashes and what makes you believe it's going to keep going?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Take it and invest it. After investing for 20 years at 6% interest, your initial investment of $650,000 will have grown to $2,084,638 with literally ZERO outlay on your part. Meanwhile, that house in Reston will have property taxes, repairs, etc. and even if it's paid off will absolutely COST you money year over year.

Isn't her house paid off and she will make rental income? Your scenario assumes the house only carries costs and appreciate with inflation if at all. She can take rental income and invest it in the markets. She needs to calculate how much rental income she will net and compare with the performance of her market investments. She isn't likely to do better in the markets than she is already doing, because this assumes re-education and for her to change her strategies.

Another question to ask is whether she wants to pass the house on to her kids. She needs to do the numbers, that's the bottom line. Also, it is beneficial for her to sell and not pay cap gains tax on her appreciation now before it gets rolled over into a rental property. But then she gets to deduct expenses of rental maint. from her income as well as depreciation. Depending on her income bracket she may get tax breaks and invest the money she would have had to pay in taxes each year.

What you say (cash out, pay no tax and invest the whole 600+K in the markets that will continue growing steadily with a rather high rate of 6% and with no risk) sounds tempting and convincing, but I don't think counting on markets consistently returning this for the next 2 decades is realistic. You are looking at the past performance, but then the same rule has to apply to housing market where properties keep appreciating. Yet we don't believe this will continue and believe housing prices may actually drop or barely keep up with inflation. What makes you believe markets will keep rising in that scenario?

The stock market consistently returns 7%+ over time. So as long as you take it out of market a few years before you actually fully need it you should be good....market is the simplest way to get a good return. Much less risky than a rental house, especially one that's older and will need work. What if you go 3 months between renters, then your profits for the year might be gone.

Are you saying everyone who had been using RE for investment is foolish? If it is that easy to make 7% yearly with no risk why isn't everyone doing it? It's not just regular schmucks investing, it's billion dollar companies, they buy RE too. They key is diversifying

[Anonymous]

Anonymous wrote:Sell. I would not want the legal risk of being a landlord.

[phone]

[Anonymous]

Sell and sleep well at night.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Take it and invest it. After investing for 20 years at 6% interest, your initial investment of $650,000 will have grown to $2,084,638 with literally ZERO outlay on your part. Meanwhile, that house in Reston will have property taxes, repairs, etc. and even if it's paid off will absolutely COST you money year over year.

Isn't her house paid off and she will make rental income? Your scenario assumes the house only carries costs and appreciate with inflation if at all. She can take rental income and invest it in the markets. She needs to calculate how much rental income she will net and compare with the performance of her market investments. She isn't likely to do better in the markets than she is already doing, because this assumes re-education and for her to change her strategies.

Another question to ask is whether she wants to pass the house on to her kids. She needs to do the numbers, that's the bottom line. Also, it is beneficial for her to sell and not pay cap gains tax on her appreciation now before it gets rolled over into a rental property. But then she gets to deduct expenses of rental maint. from her income as well as depreciation. Depending on her income bracket she may get tax breaks and invest the money she would have had to pay in taxes each year.

What you say (cash out, pay no tax and invest the whole 600+K in the markets that will continue growing steadily with a rather high rate of 6% and with no risk) sounds tempting and convincing, but I don't think counting on markets consistently returning this for the next 2 decades is realistic. You are looking at the past performance, but then the same rule has to apply to housing market where properties keep appreciating. Yet we don't believe this will continue and believe housing prices may actually drop or barely keep up with inflation. What makes you believe markets will keep rising in that scenario?

The stock market consistently returns 7%+ over time. So as long as you take it out of market a few years before you actually fully need it you should be good....market is the simplest way to get a good return. Much less risky than a rental house, especially one that's older and will need work. What if you go 3 months between renters, then your profits for the year might be gone.

Consistently since what time? What happens during market crashes and what makes you believe it's going to keep going?

Stock market returns since 2005 have averaged 9.51%. So if you put $100 in in 2005 you'd have $537 now, even with the downturn years. So as long as you didn't need to pull it out in 2008 you would do better by just leaving it in and riding out the downturn. It has always been this way

Similarly S&P500 return since 1950 is 11.28% per year and 7.49% inflation adjusted.
No reason to assume that the last 70+ years of data points will significantly change anytime soon.

So I stand by my statement that you can average 7% in the stock market over time. Just be sure to pull what you need in the next 2-3 years out of the market (ie. start pulling your 529 out of stocks 2-3 years before your kid starts college, but not all of it as you wont need all of it until the 4th year of college).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Take it and invest it. After investing for 20 years at 6% interest, your initial investment of $650,000 will have grown to $2,084,638 with literally ZERO outlay on your part. Meanwhile, that house in Reston will have property taxes, repairs, etc. and even if it's paid off will absolutely COST you money year over year.

Isn't her house paid off and she will make rental income? Your scenario assumes the house only carries costs and appreciate with inflation if at all. She can take rental income and invest it in the markets. She needs to calculate how much rental income she will net and compare with the performance of her market investments. She isn't likely to do better in the markets than she is already doing, because this assumes re-education and for her to change her strategies.

Another question to ask is whether she wants to pass the house on to her kids. She needs to do the numbers, that's the bottom line. Also, it is beneficial for her to sell and not pay cap gains tax on her appreciation now before it gets rolled over into a rental property. But then she gets to deduct expenses of rental maint. from her income as well as depreciation. Depending on her income bracket she may get tax breaks and invest the money she would have had to pay in taxes each year.

What you say (cash out, pay no tax and invest the whole 600+K in the markets that will continue growing steadily with a rather high rate of 6% and with no risk) sounds tempting and convincing, but I don't think counting on markets consistently returning this for the next 2 decades is realistic. You are looking at the past performance, but then the same rule has to apply to housing market where properties keep appreciating. Yet we don't believe this will continue and believe housing prices may actually drop or barely keep up with inflation. What makes you believe markets will keep rising in that scenario?

The stock market consistently returns 7%+ over time. So as long as you take it out of market a few years before you actually fully need it you should be good....market is the simplest way to get a good return. Much less risky than a rental house, especially one that's older and will need work. What if you go 3 months between renters, then your profits for the year might be gone.

Are you saying everyone who had been using RE for investment is foolish? If it is that easy to make 7% yearly with no risk why isn't everyone doing it? It's not just regular schmucks investing, it's billion dollar companies, they buy RE too. They key is diversifying

Absolutely not. If you want to invest in RE it is safer to do so with other investment vehicles than your personal house/rental homes.

Obviously it is not 7% with no risk, but the market has returned over 7% (inflation adjusted) since 1950. So put your money in S&P500 or total stock market index funds and you will do just fine. Diversify as you see fit. I have a well balanced portfolio---done the research and I prefer to keep my RE investments thru funds not thru personal investments as that reduces the risks greatly.
All it takes is one bad renter to destroy your home or one time where you cannot find renters for 2-3 months and you wipe out all gains for a year. If you hire a management company they will take one months rent for finding renters/setting up lease and 10% of each months rent (more in a vacation rental area if it's weekly renters).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Take it and invest it. After investing for 20 years at 6% interest, your initial investment of $650,000 will have grown to $2,084,638 with literally ZERO outlay on your part. Meanwhile, that house in Reston will have property taxes, repairs, etc. and even if it's paid off will absolutely COST you money year over year.

Isn't her house paid off and she will make rental income? Your scenario assumes the house only carries costs and appreciate with inflation if at all. She can take rental income and invest it in the markets. She needs to calculate how much rental income she will net and compare with the performance of her market investments. She isn't likely to do better in the markets than she is already doing, because this assumes re-education and for her to change her strategies.

Another question to ask is whether she wants to pass the house on to her kids. She needs to do the numbers, that's the bottom line. Also, it is beneficial for her to sell and not pay cap gains tax on her appreciation now before it gets rolled over into a rental property. But then she gets to deduct expenses of rental maint. from her income as well as depreciation. Depending on her income bracket she may get tax breaks and invest the money she would have had to pay in taxes each year.

What you say (cash out, pay no tax and invest the whole 600+K in the markets that will continue growing steadily with a rather high rate of 6% and with no risk) sounds tempting and convincing, but I don't think counting on markets consistently returning this for the next 2 decades is realistic. You are looking at the past performance, but then the same rule has to apply to housing market where properties keep appreciating. Yet we don't believe this will continue and believe housing prices may actually drop or barely keep up with inflation. What makes you believe markets will keep rising in that scenario?

The stock market consistently returns 7%+ over time. So as long as you take it out of market a few years before you actually fully need it you should be good....market is the simplest way to get a good return. Much less risky than a rental house, especially one that's older and will need work. What if you go 3 months between renters, then your profits for the year might be gone.

Are you saying everyone who had been using RE for investment is foolish? If it is that easy to make 7% yearly with no risk why isn't everyone doing it? It's not just regular schmucks investing, it's billion dollar companies, they buy RE too. They key is diversifying

Not really. You can diversify more easily with a REIT. The reason very rich or professional RE investors do it is because they have a system that works at scale and need the tax write-offs--they have accountants that help them plan the deductions/business expenses, they can get loans at a good price so they aren't using their own money (a paid off house is still using your own money because you could sell it and get that money), they have teams of managers/contractors to optimize rent collection, repairs, turnover of apartments, they have insurance deals etc. If you try to do a real estate one-off without all these things, it has a chance of sort of paying off and being a good inflation hedge, but it usually offers more risk than reward and much more hassle than comparable investments.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Take it and invest it. After investing for 20 years at 6% interest, your initial investment of $650,000 will have grown to $2,084,638 with literally ZERO outlay on your part. Meanwhile, that house in Reston will have property taxes, repairs, etc. and even if it's paid off will absolutely COST you money year over year.

Isn't her house paid off and she will make rental income? Your scenario assumes the house only carries costs and appreciate with inflation if at all. She can take rental income and invest it in the markets. She needs to calculate how much rental income she will net and compare with the performance of her market investments. She isn't likely to do better in the markets than she is already doing, because this assumes re-education and for her to change her strategies.

Another question to ask is whether she wants to pass the house on to her kids. She needs to do the numbers, that's the bottom line. Also, it is beneficial for her to sell and not pay cap gains tax on her appreciation now before it gets rolled over into a rental property. But then she gets to deduct expenses of rental maint. from her income as well as depreciation. Depending on her income bracket she may get tax breaks and invest the money she would have had to pay in taxes each year.

What you say (cash out, pay no tax and invest the whole 600+K in the markets that will continue growing steadily with a rather high rate of 6% and with no risk) sounds tempting and convincing, but I don't think counting on markets consistently returning this for the next 2 decades is realistic. You are looking at the past performance, but then the same rule has to apply to housing market where properties keep appreciating. Yet we don't believe this will continue and believe housing prices may actually drop or barely keep up with inflation. What makes you believe markets will keep rising in that scenario?

The stock market consistently returns 7%+ over time. So as long as you take it out of market a few years before you actually fully need it you should be good....market is the simplest way to get a good return. Much less risky than a rental house, especially one that's older and will need work. What if you go 3 months between renters, then your profits for the year might be gone.

Are you saying everyone who had been using RE for investment is foolish? If it is that easy to make 7% yearly with no risk why isn't everyone doing it? It's not just regular schmucks investing, it's billion dollar companies, they buy RE too. They key is diversifying

Not really. You can diversify more easily with a REIT. The reason very rich or professional RE investors do it is because they have a system that works at scale and need the tax write-offs--they have accountants that help them plan the deductions/business expenses, they can get loans at a good price so they aren't using their own money (a paid off house is still using your own money because you could sell it and get that money), they have teams of managers/contractors to optimize rent collection, repairs, turnover of apartments, they have insurance deals etc. If you try to do a real estate one-off without all these things, it has a chance of sort of paying off and being a good inflation hedge, but it usually offers more risk than reward and much more hassle than comparable investments.

+1

REIT is the way to diversify without the risk of being a landlord.

Shocking that many do not understand that yes, the market has averaged over 7% for 70+ years. Put a good portion of your money in a SP500 or total stock market index and then diversify with the other funds you deem appropriate. But use the funds, as they reduce the individual risk (and stress of managing).

Fact is majority of people do NOT make money as individual landlords. Most struggle to break even, let alone make 7%+

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Take it and invest it. After investing for 20 years at 6% interest, your initial investment of $650,000 will have grown to $2,084,638 with literally ZERO outlay on your part. Meanwhile, that house in Reston will have property taxes, repairs, etc. and even if it's paid off will absolutely COST you money year over year.

Isn't her house paid off and she will make rental income? Your scenario assumes the house only carries costs and appreciate with inflation if at all. She can take rental income and invest it in the markets. She needs to calculate how much rental income she will net and compare with the performance of her market investments. She isn't likely to do better in the markets than she is already doing, because this assumes re-education and for her to change her strategies.

Another question to ask is whether she wants to pass the house on to her kids. She needs to do the numbers, that's the bottom line. Also, it is beneficial for her to sell and not pay cap gains tax on her appreciation now before it gets rolled over into a rental property. But then she gets to deduct expenses of rental maint. from her income as well as depreciation. Depending on her income bracket she may get tax breaks and invest the money she would have had to pay in taxes each year.

What you say (cash out, pay no tax and invest the whole 600+K in the markets that will continue growing steadily with a rather high rate of 6% and with no risk) sounds tempting and convincing, but I don't think counting on markets consistently returning this for the next 2 decades is realistic. You are looking at the past performance, but then the same rule has to apply to housing market where properties keep appreciating. Yet we don't believe this will continue and believe housing prices may actually drop or barely keep up with inflation. What makes you believe markets will keep rising in that scenario?

The stock market consistently returns 7%+ over time. So as long as you take it out of market a few years before you actually fully need it you should be good....market is the simplest way to get a good return. Much less risky than a rental house, especially one that's older and will need work. What if you go 3 months between renters, then your profits for the year might be gone.

Consistently since what time? What happens during market crashes and what makes you believe it's going to keep going?

Stock market returns since 2005 have averaged 9.51%. So if you put $100 in in 2005 you'd have $537 now, even with the downturn years. So as long as you didn't need to pull it out in 2008 you would do better by just leaving it in and riding out the downturn. It has always been this way

Similarly S&P500 return since 1950 is 11.28% per year and 7.49% inflation adjusted.
No reason to assume that the last 70+ years of data points will significantly change anytime soon.

So I stand by my statement that you can average 7% in the stock market over time. Just be sure to pull what you need in the next 2-3 years out of the market (ie. start pulling your 529 out of stocks 2-3 years before your kid starts college, but not all of it as you wont need all of it until the 4th year of college).

You are talking about past here. In the past RE also performed extremely well. Many doubled or tripled their money invested in RE in high COL areas decades ago. People retired because they bought RE early on in places where it's skyrocketed. Is this going to continue? How likely is it that RE will become a dump and a loss to own while stocks keep going higher and higher? Not likely, because things are connected. We had printed sh** ton of money in the last decades even over the last few years. If I count on stocks performing well then so would RE.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Take it and invest it. After investing for 20 years at 6% interest, your initial investment of $650,000 will have grown to $2,084,638 with literally ZERO outlay on your part. Meanwhile, that house in Reston will have property taxes, repairs, etc. and even if it's paid off will absolutely COST you money year over year.

Isn't her house paid off and she will make rental income? Your scenario assumes the house only carries costs and appreciate with inflation if at all. She can take rental income and invest it in the markets. She needs to calculate how much rental income she will net and compare with the performance of her market investments. She isn't likely to do better in the markets than she is already doing, because this assumes re-education and for her to change her strategies.

Another question to ask is whether she wants to pass the house on to her kids. She needs to do the numbers, that's the bottom line. Also, it is beneficial for her to sell and not pay cap gains tax on her appreciation now before it gets rolled over into a rental property. But then she gets to deduct expenses of rental maint. from her income as well as depreciation. Depending on her income bracket she may get tax breaks and invest the money she would have had to pay in taxes each year.

What you say (cash out, pay no tax and invest the whole 600+K in the markets that will continue growing steadily with a rather high rate of 6% and with no risk) sounds tempting and convincing, but I don't think counting on markets consistently returning this for the next 2 decades is realistic. You are looking at the past performance, but then the same rule has to apply to housing market where properties keep appreciating. Yet we don't believe this will continue and believe housing prices may actually drop or barely keep up with inflation. What makes you believe markets will keep rising in that scenario?

The stock market consistently returns 7%+ over time. So as long as you take it out of market a few years before you actually fully need it you should be good....market is the simplest way to get a good return. Much less risky than a rental house, especially one that's older and will need work. What if you go 3 months between renters, then your profits for the year might be gone.

Are you saying everyone who had been using RE for investment is foolish? If it is that easy to make 7% yearly with no risk why isn't everyone doing it? It's not just regular schmucks investing, it's billion dollar companies, they buy RE too. They key is diversifying

Not really. You can diversify more easily with a REIT. The reason very rich or professional RE investors do it is because they have a system that works at scale and need the tax write-offs--they have accountants that help them plan the deductions/business expenses, they can get loans at a good price so they aren't using their own money (a paid off house is still using your own money because you could sell it and get that money), they have teams of managers/contractors to optimize rent collection, repairs, turnover of apartments, they have insurance deals etc. If you try to do a real estate one-off without all these things, it has a chance of sort of paying off and being a good inflation hedge, but it usually offers more risk than reward and much more hassle than comparable investments.

+1

REIT is the way to diversify without the risk of being a landlord.

Shocking that many do not understand that yes, the market has averaged over 7% for 70+ years. Put a good portion of your money in a SP500 or total stock market index and then diversify with the other funds you deem appropriate. But use the funds, as they reduce the individual risk (and stress of managing).

Fact is majority of people do NOT make money as individual landlords. Most struggle to break even, let alone make 7%+

I am guessing those struggling to break even have debt and don't own rentals free and clear. Not OP's situation. She will make profit. How much depends on rents her area commands and her expenses on the house (which are tax deductible for rental property). She only has one modestly priced home, not millions invested in RE.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Take it and invest it. After investing for 20 years at 6% interest, your initial investment of $650,000 will have grown to $2,084,638 with literally ZERO outlay on your part. Meanwhile, that house in Reston will have property taxes, repairs, etc. and even if it's paid off will absolutely COST you money year over year.

Isn't her house paid off and she will make rental income? Your scenario assumes the house only carries costs and appreciate with inflation if at all. She can take rental income and invest it in the markets. She needs to calculate how much rental income she will net and compare with the performance of her market investments. She isn't likely to do better in the markets than she is already doing, because this assumes re-education and for her to change her strategies.

Another question to ask is whether she wants to pass the house on to her kids. She needs to do the numbers, that's the bottom line. Also, it is beneficial for her to sell and not pay cap gains tax on her appreciation now before it gets rolled over into a rental property. But then she gets to deduct expenses of rental maint. from her income as well as depreciation. Depending on her income bracket she may get tax breaks and invest the money she would have had to pay in taxes each year.

What you say (cash out, pay no tax and invest the whole 600+K in the markets that will continue growing steadily with a rather high rate of 6% and with no risk) sounds tempting and convincing, but I don't think counting on markets consistently returning this for the next 2 decades is realistic. You are looking at the past performance, but then the same rule has to apply to housing market where properties keep appreciating. Yet we don't believe this will continue and believe housing prices may actually drop or barely keep up with inflation. What makes you believe markets will keep rising in that scenario?

The stock market consistently returns 7%+ over time. So as long as you take it out of market a few years before you actually fully need it you should be good....market is the simplest way to get a good return. Much less risky than a rental house, especially one that's older and will need work. What if you go 3 months between renters, then your profits for the year might be gone.

Are you saying everyone who had been using RE for investment is foolish? If it is that easy to make 7% yearly with no risk why isn't everyone doing it? It's not just regular schmucks investing, it's billion dollar companies, they buy RE too. They key is diversifying

Absolutely not. If you want to invest in RE it is safer to do so with other investment vehicles than your personal house/rental homes.

Obviously it is not 7% with no risk, but the market has returned over 7% (inflation adjusted) since 1950. So put your money in S&P500 or total stock market index funds and you will do just fine. Diversify as you see fit. I have a well balanced portfolio---done the research and I prefer to keep my RE investments thru funds not thru personal investments as that reduces the risks greatly.
All it takes is one bad renter to destroy your home or one time where you cannot find renters for 2-3 months and you wipe out all gains for a year. If you hire a management company they will take one months rent for finding renters/setting up lease and 10% of each months rent (more in a vacation rental area if it's weekly renters).

What do you suggest for people who invested most of their NW into RE to correct such "horrible mistake"?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Take it and invest it. After investing for 20 years at 6% interest, your initial investment of $650,000 will have grown to $2,084,638 with literally ZERO outlay on your part. Meanwhile, that house in Reston will have property taxes, repairs, etc. and even if it's paid off will absolutely COST you money year over year.

Isn't her house paid off and she will make rental income? Your scenario assumes the house only carries costs and appreciate with inflation if at all. She can take rental income and invest it in the markets. She needs to calculate how much rental income she will net and compare with the performance of her market investments. She isn't likely to do better in the markets than she is already doing, because this assumes re-education and for her to change her strategies.

Another question to ask is whether she wants to pass the house on to her kids. She needs to do the numbers, that's the bottom line. Also, it is beneficial for her to sell and not pay cap gains tax on her appreciation now before it gets rolled over into a rental property. But then she gets to deduct expenses of rental maint. from her income as well as depreciation. Depending on her income bracket she may get tax breaks and invest the money she would have had to pay in taxes each year.

What you say (cash out, pay no tax and invest the whole 600+K in the markets that will continue growing steadily with a rather high rate of 6% and with no risk) sounds tempting and convincing, but I don't think counting on markets consistently returning this for the next 2 decades is realistic. You are looking at the past performance, but then the same rule has to apply to housing market where properties keep appreciating. Yet we don't believe this will continue and believe housing prices may actually drop or barely keep up with inflation. What makes you believe markets will keep rising in that scenario?

The stock market consistently returns 7%+ over time. So as long as you take it out of market a few years before you actually fully need it you should be good....market is the simplest way to get a good return. Much less risky than a rental house, especially one that's older and will need work. What if you go 3 months between renters, then your profits for the year might be gone.

Are you saying everyone who had been using RE for investment is foolish? If it is that easy to make 7% yearly with no risk why isn't everyone doing it? It's not just regular schmucks investing, it's billion dollar companies, they buy RE too. They key is diversifying

Absolutely not. If you want to invest in RE it is safer to do so with other investment vehicles than your personal house/rental homes.

Obviously it is not 7% with no risk, but the market has returned over 7% (inflation adjusted) since 1950. So put your money in S&P500 or total stock market index funds and you will do just fine. Diversify as you see fit. I have a well balanced portfolio---done the research and I prefer to keep my RE investments thru funds not thru personal investments as that reduces the risks greatly.
All it takes is one bad renter to destroy your home or one time where you cannot find renters for 2-3 months and you wipe out all gains for a year. If you hire a management company they will take one months rent for finding renters/setting up lease and 10% of each months rent (more in a vacation rental area if it's weekly renters).

What do you suggest for people who invested most of their NW into RE to correct such "horrible mistake"?

Maybe the PP is referring to crowdfunding investments like fundrise? The main issues with REITs is they are horrible in a taxable account and one could argue that you are less diversified by overweighting REITs because this is clearly a sector bet. People generally underestimate the risks involved with any type of investment, so it's good to be skeptical.

[Anonymous]

past returns are no guarantee of future returns.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Take it and invest it. After investing for 20 years at 6% interest, your initial investment of $650,000 will have grown to $2,084,638 with literally ZERO outlay on your part. Meanwhile, that house in Reston will have property taxes, repairs, etc. and even if it's paid off will absolutely COST you money year over year.

Isn't her house paid off and she will make rental income? Your scenario assumes the house only carries costs and appreciate with inflation if at all. She can take rental income and invest it in the markets. She needs to calculate how much rental income she will net and compare with the performance of her market investments. She isn't likely to do better in the markets than she is already doing, because this assumes re-education and for her to change her strategies.

Another question to ask is whether she wants to pass the house on to her kids. She needs to do the numbers, that's the bottom line. Also, it is beneficial for her to sell and not pay cap gains tax on her appreciation now before it gets rolled over into a rental property. But then she gets to deduct expenses of rental maint. from her income as well as depreciation. Depending on her income bracket she may get tax breaks and invest the money she would have had to pay in taxes each year.

What you say (cash out, pay no tax and invest the whole 600+K in the markets that will continue growing steadily with a rather high rate of 6% and with no risk) sounds tempting and convincing, but I don't think counting on markets consistently returning this for the next 2 decades is realistic. You are looking at the past performance, but then the same rule has to apply to housing market where properties keep appreciating. Yet we don't believe this will continue and believe housing prices may actually drop or barely keep up with inflation. What makes you believe markets will keep rising in that scenario?

The stock market consistently returns 7%+ over time. So as long as you take it out of market a few years before you actually fully need it you should be good....market is the simplest way to get a good return. Much less risky than a rental house, especially one that's older and will need work. What if you go 3 months between renters, then your profits for the year might be gone.

Are you saying everyone who had been using RE for investment is foolish? If it is that easy to make 7% yearly with no risk why isn't everyone doing it? It's not just regular schmucks investing, it's billion dollar companies, they buy RE too. They key is diversifying

Absolutely not. If you want to invest in RE it is safer to do so with other investment vehicles than your personal house/rental homes.

Obviously it is not 7% with no risk, but the market has returned over 7% (inflation adjusted) since 1950. So put your money in S&P500 or total stock market index funds and you will do just fine. Diversify as you see fit. I have a well balanced portfolio---done the research and I prefer to keep my RE investments thru funds not thru personal investments as that reduces the risks greatly.
All it takes is one bad renter to destroy your home or one time where you cannot find renters for 2-3 months and you wipe out all gains for a year. If you hire a management company they will take one months rent for finding renters/setting up lease and 10% of each months rent (more in a vacation rental area if it's weekly renters).

What do you suggest for people who invested most of their NW into RE to correct such "horrible mistake"?

Maybe the PP is referring to crowdfunding investments like fundrise? The main issues with REITs is they are horrible in a taxable account and one could argue that you are less diversified by overweighting REITs because this is clearly a sector bet. People generally underestimate the risks involved with any type of investment, so it's good to be skeptical.

REITs aren't a sector bet, they are a diversification of asset type. It's more diversification than a total market stock index. But you should hold them in a tax-deferred/protected account.

[Anonymous]

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Anonymous wrote:Take it and invest it. After investing for 20 years at 6% interest, your initial investment of $650,000 will have grown to $2,084,638 with literally ZERO outlay on your part. Meanwhile, that house in Reston will have property taxes, repairs, etc. and even if it's paid off will absolutely COST you money year over year.

Isn't her house paid off and she will make rental income? Your scenario assumes the house only carries costs and appreciate with inflation if at all. She can take rental income and invest it in the markets. She needs to calculate how much rental income she will net and compare with the performance of her market investments. She isn't likely to do better in the markets than she is already doing, because this assumes re-education and for her to change her strategies.

Another question to ask is whether she wants to pass the house on to her kids. She needs to do the numbers, that's the bottom line. Also, it is beneficial for her to sell and not pay cap gains tax on her appreciation now before it gets rolled over into a rental property. But then she gets to deduct expenses of rental maint. from her income as well as depreciation. Depending on her income bracket she may get tax breaks and invest the money she would have had to pay in taxes each year.

What you say (cash out, pay no tax and invest the whole 600+K in the markets that will continue growing steadily with a rather high rate of 6% and with no risk) sounds tempting and convincing, but I don't think counting on markets consistently returning this for the next 2 decades is realistic. You are looking at the past performance, but then the same rule has to apply to housing market where properties keep appreciating. Yet we don't believe this will continue and believe housing prices may actually drop or barely keep up with inflation. What makes you believe markets will keep rising in that scenario?

The stock market consistently returns 7%+ over time. So as long as you take it out of market a few years before you actually fully need it you should be good....market is the simplest way to get a good return. Much less risky than a rental house, especially one that's older and will need work. What if you go 3 months between renters, then your profits for the year might be gone.

Are you saying everyone who had been using RE for investment is foolish? If it is that easy to make 7% yearly with no risk why isn't everyone doing it? It's not just regular schmucks investing, it's billion dollar companies, they buy RE too. They key is diversifying

Absolutely not. If you want to invest in RE it is safer to do so with other investment vehicles than your personal house/rental homes.

Obviously it is not 7% with no risk, but the market has returned over 7% (inflation adjusted) since 1950. So put your money in S&P500 or total stock market index funds and you will do just fine. Diversify as you see fit. I have a well balanced portfolio---done the research and I prefer to keep my RE investments thru funds not thru personal investments as that reduces the risks greatly.
All it takes is one bad renter to destroy your home or one time where you cannot find renters for 2-3 months and you wipe out all gains for a year. If you hire a management company they will take one months rent for finding renters/setting up lease and 10% of each months rent (more in a vacation rental area if it's weekly renters).

What do you suggest for people who invested most of their NW into RE to correct such "horrible mistake"?

Maybe the PP is referring to crowdfunding investments like fundrise? The main issues with REITs is they are horrible in a taxable account and one could argue that you are less diversified by overweighting REITs because this is clearly a sector bet. People generally underestimate the risks involved with any type of investment, so it's good to be skeptical.

REITs aren't a sector bet, they are a diversification of asset type. It's more diversification than a total market stock index. But you should hold them in a tax-deferred/protected account.

Clarifying above--Holding a REIT (in small percentage) + a total market stock index is more diversification rather than a particular sector bet. Similar to also holding a little bit of gold, a little bit of private capital, a little bit of crypto, a little bit of commodities etc. These are not a sector of equities rather a different class of assets.