Stocks/Bonds vs Remote REI?

5 Replies

Hi,


Has anyone compared the returns of a stock/bond portfolio against investing remotely in real estate? I see both of these as less involved forms of investment although remote REI will require managing the manager. Was just curious how you guys thought they compared and whether the extra returns of remote REI were worth it.

@Gary Clisele I did my first out of state apartment deal this past year. I normally buy around the Berwyn, IL area five minutes from home, but my partner and I decided to make the jump. We bought about 2 hours from home. Here are the positives and negative in my opinion. 

Positives:

-Cheaper price "per door"

-Lower taxes

-Higher cap rates

Negatives

-Much harder to control rehab/turnover costs

-Much less control

-No manager ever cares as much as you do!

If I was buying only a turn key house, I would never buy remotely. The fact that we have a complex makes it more appealing. Also, 2 hours is not a horrible drive, and I can visit the property every month or two which helps mitigate some of the risk. If you aren't getting a screaming deal (15-20% COC or better) I would just buy stocks!

@Gary Clisele - On fees alone, I believe it is cheaper to go real estate. I have used a turnkey real estate company for the past four years will consistent returns in the 7% range and also invest in stocks.

Fees for stocks and bonds are based on your total investment and range from 2.5-3.5% of the total investment and are paid regardless of a gain or loss. so if I have $60K to invest my fees will be $1500 at a minimum regardless if I make or loss money.

Management Fees on my rentals are based only on the growth (rent). So my $60k home with $650 in rent has a $65 fee only when the rent comes in and when it does its .1%. 

Of course there is also insurance and taxes and maintenance (still well lower than the $1500 for stocks) but it is an asset that will appreciate (specifically where I buy) and if there is a crash I still get the rent.

I do also invest in stocks using a method called Iron Condor on the S&P500 Index. My monthly profits are reinvested back into my real estate...  

Hope that helps!

Depends on what type of RE you do.

I do remote REI, I do BRRR and all my houses are on mortgages which allowed my to pull out all my cash and additional created equity. So infinite ROI, hard to beat in stocks.

That said, I wasn't as good at when I first started, so you have to account for what experience and proficiency is worth over time. Concerning managing, that part IMO is largely up to the person. I have no problem managing or dealing with people, so it works in my favor. If you aren't comfortable with leaning into people and managing them, you might find it more difficult. Leverage your strengths!

I wrote an article on just stocks/bonds versus real property in general-

https://www.biggerpockets.com/renewsblog/2016/02/0...

Then more specifically about the 'less involved' part... I live in LA and have always invested remotely and I'm extremely hands-off. I only manage the property manager, and when they are doing well, that's basically no time investment for me. The passivity of the real estate investment is completely dependent on how you structure it, so that's important.

I will say I could see major perks in not having to deal with or hear about tenant drama, or waiting to hear if a recent hurricane tore up any of your houses (like I am right now), but there are big financial benefits to it if you're willing to deal with all that.

Originally posted by @Gary Clisele :

Hi,


Has anyone compared the returns of a stock/bond portfolio against investing remotely in real estate? I see both of these as less involved forms of investment although remote REI will require managing the manager. Was just curious how you guys thought they compared and whether the extra returns of remote REI were worth it.

 The difference between a Real Estate Investment & that of a stock investment is the ability to use the bank's money.

You can't have a bank pay for 3/4 of your stock. So those who are investing in Real Estate and only looking at cash flow while ignoring principal pay down are in my opinion missing the boat.