Real Estate vs Stocks

[Anonymous]

I am in Northern Virginia and have an investment townhome. I barely make $100-$150 per month after the mortgage and HOA fees are accounted for. Also this area seems not to meet the 1% rule that is touted on real estate forums. I am not a savvy investor in stocks and just started investing in index funds.
But I keep hearing that the returns for the next decade is going to Ben less than 4%.

What is it that everyone recommend here?

[Anonymous]

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.

[Anonymous]

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.

[Anonymous]

1% rule is that Rent should be 1% or more than the purchase price which is very difficult in Northern VA

[Anonymous]

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

[Anonymous]

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.

[Anonymous]

I assume you are depreciating it, correct? Even with that still breaking even?

[Anonymous]

I am wrestling with this exact question. We are in our upper 30s, with young kids in good charter schools. We already max out our TSP/401ks and are doing okay there but not spectacular, and we've got strong cash savings. We bought our 4BR Petworth townhome 6 years ago, so the mortgage and rate are quite good, and we could rent it out for the monthly mortgage total or more. We intend to move someday, but not in a hurry. So the question we're facing, in the 3-5 years before we expect to move, is whether to invest the money in stocks or save up a couple hundred thousand so we can keep it and rent out our current place. I lean to the latter, my spouse to the former. Would really welcome input on the long term pros and cons of each approach.

[Anonymous]

Anonymous wrote:

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?

[Anonymous]

Having that much in a single asset doesn't sound very diverse. Plus this "the rent covers the mortgage" thing seems like a loose metric when the mortgage could have been 80 or 95 %

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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?

There are probably Baltimore suburbs where you could make this work.

[Anonymous]

Try Peerstreet for real estate investing

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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...

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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!

[Anonymous]

You can't really make money in the DC area with real estate unless you are investing in very sub-prime properties or you get significant appreciation in your property.