Getting rid of stock to buy RE

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Getting rid of stock to buy RE

Dimitri Paspalaris
Investor · Rota, Spain · Member since 2019 · 156 posts · 68 votes

Currently have 50 k in the stock market and I think the market is about to dive. What do yal think about pulling that out and investing it in a property. Thanks for the help.

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Frank Wong
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
7y

The big difference between RE and stock is control and difficulty. RE you have more control over what the possible outcome can be.  With stocks, you have zero control.  You can do everything right on your analysis and still lose money.  

I would say stock investing is probably 10x harder to learn and there is much more emotional capital that needs to be used than RE. I trade the futures market I know first hand how hard the market is.  Buy low and sell high is not a real strategy much more complex than that, any real trader knows that. lol 

Stocks do have their advantages in the liquidity department.  I can be out of position in a second and have my cash ready.   Both investments require you to be on top of your knowledge and education.  Most important for both is to know risk management and proper leverage. 

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  • Christopher Phillips
    Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    7y

    @Dimitri Paspalaris

    Depends on your return and your tax consequences.

    Let's say that the long term average for returns in the stock market is 9%. You would have to get a return of at least 9% in real estate to make it worthwhile.  You wouldn't want to forgo 9% in returns to get 3% or negative returns in real estate.

    Also, if you have gains, you would need to not only make at least 9%, you would also have to earn enough to cover the tax and fee consequences of cashing out your stocks. 

    3Reply
  • Pat L.
    Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
    7y

    Did it after black Monday in 1987.

    Went into REI ever since & we've never looked back.

    2Reply
  • Dimitri Paspalaris
    OP
    Investor · Rota, Spain · Member since 2019 · 156 posts · 68 votes
    7y

    @Christopher Phillips thanks for the insight. I already max out my tsp roth and roth ira. I am pulling out the 50k from my taxable funds. I do not have an issue paying the fees. I am just starting to see that re is just a better deal than stocks. Plus I have more control over the asset in RE than I do in stocks. 

    @Pat L. Thanks for the advice. What properties do you like to go get and what advise would you give a noobie like me? Thanks

    0Reply
  • Pat L.
    Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
    7y

    @Dimitri Paspalaris

    Also an (old retired) engineer I will PM you.

    0Reply
  • Jaron WallingPro Member
    Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
    7y

    You live in Monterey, CA and want to pull out $50K worth of stocks to buy real estate. What is that going to buy? What is your target market? In my opinion it seems like you're jumping on the band wagon. Let's be honest here real estate is risky just like the stock market. Given the position of the cycle it's not a wise idea.  

    4Reply
  • Christopher Phillips
    Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    7y

    @Dimitri Paspalaris

    Fees aren't the point.

    The long term growth of the stock market is 9%.

    The long term growth of real estate has only been 5.4%.

    Does it mean you shouldn't move that stock in REI? No, just that you have to make sure that you're getting a better than 9% on your REI.

    4Reply
  • Dimitri Paspalaris
    OP
    Investor · Rota, Spain · Member since 2019 · 156 posts · 68 votes
    7y

    @Jaron Walling I am stationed in Monterery with the military. I am gonna take the 50k and put into some RE in Jax, FL my hometown. I probably should have mentioned it in my original post. 

    @Christopher Phillips Thanks for the insight and I agree with the numbers you provided. My goal is to find great deals and have at least a 9% return.

    3Reply
  • Jacob Sampson
    Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    I agree we are probably closer to the top of the market than the bottom.  But the same likely goes for real estate as well.  Isn't Florida kind of a boom and bust state for real estate?  If so then you would probably be buying in near the top of the real estate market as well.   

    0Reply
  • Frank Wong
    Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
    7y

    The big difference between RE and stock is control and difficulty. RE you have more control over what the possible outcome can be.  With stocks, you have zero control.  You can do everything right on your analysis and still lose money.  

    I would say stock investing is probably 10x harder to learn and there is much more emotional capital that needs to be used than RE. I trade the futures market I know first hand how hard the market is.  Buy low and sell high is not a real strategy much more complex than that, any real trader knows that. lol 

    Stocks do have their advantages in the liquidity department.  I can be out of position in a second and have my cash ready.   Both investments require you to be on top of your knowledge and education.  Most important for both is to know risk management and proper leverage. 

    5Reply
  • Deb S.
    Investor · Punta Gorda, FL · Member since 2010 · 154 posts · 128 votes
    7y

    @Dimitri Paspalaris

    Hi Dimitri - I've been contemplating doing the same.  I have to figure out my capital gains to see what kind of tax bill I'm going to be on the hook for first.  I'd love to add to my rental income and know I have a consistent cash flow from another property rather than hope the market has a decent return each year.

    I have a condo here in Punta Gorda in my real estate IRA with a cap rate of 7% right now. I'm pocketing just about $600/mo after condo fees, insurance, taxes, etc. Looking to buy something outside my IRA as a long term rental for passive income. Will post with any updates if I pull the trigger. Best of luck to you!

    0Reply
  • Charles S.
    NYC · Member since 2015 · 50 posts · 16 votes
    7y

    @Dimitri Paspalaris

    Real Estate and the “stock market” are both asset classes. Both have inherent risks, levels of influence available to an investor, and the possibility of principal lost.

    The level of “control” you feel you may have over real estate does not negate the fact that there things you cannot control. Local Legislation, tenant pool quality, tax legislation, natural disasters, job market growth, saturation of real inventory, and real estate market disruptions through innovation are a few of the things that you cannot control. But, naturally, you would try to mitigate these risks with different strategies which is exactly what you would do in the stock market.

    Consider both a “piece” of your financial plan if you do choose to include both. But try not to think that one should be attempted over the other.

    And also remember, as I’m sure you would consider doing with real estate, when the market “drops” that’s a perfect opportunity to buy depending on your investment strategy.

    Hope that provides a little insight.

    Charles

    5Reply
  • Marci Stein
    Rental Property Investor · New York, NY · Member since 2011 · 956 posts · 510 votes
    7y

    I did it because I wanted a bigger monthly income stream . 

    RE may pay off better in the long run but I need the money to live on now. 

    Sold stocks to buy a sFH and glad I did. 

    1Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    7y

    @Dimitri Paspalaris

    If you do sell the stocks, be aware that you may have to pay tax as a result.
    You may be subject to favorable capital gains tax rate if the stocks are long-term.

    To avoid the tax hit, you may want to also consider selling stocks that have decreased in value. Furthermore, you may want to consider a qualified opportunity fund to defer the tax hit.

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  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    I would do it absolutely . RE has unique advantages in taxes cashflow and appreciation. If you cant touch it you don’t own it

    1Reply
  • Jacob Sampson
    Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Frank Wong makes good points.  Another item that most people don't take into account when comparing RE vs the SM is the fact that in the SM your losses are limited to the money you invest.  In RE you have infinite loss potential.

    I don't mean through property losing value, that can happen but will generally rebound.  I mean through tenant turn over and damage to property.  You can lose money year after year after year.

    To Franks point you do have some control over that scenario, but not complete control.

    Comparing loss potential is an interesting topic IMO. 

    0Reply
  • Dimitri Paspalaris
    OP
    Investor · Rota, Spain · Member since 2019 · 156 posts · 68 votes
    7y

    Thank you everyone for the insight. Learning about RE has been eye opening for me and everyone has brought up very good points. 

    0Reply
  • Canesha Edwards
    Developer · Atlanta, GA · Member since 2014 · 475 posts · 424 votes
    7y

    @Dimitri Paspalaris

    Real estate gives you more control over your investment and provides better cash flow than stocks in the long run ( just my opinion).

    If you are going to cash in stock, consider investing in opportunity zones. Opportunity zones have been designated all over the US. These areas are considered low economic areas in need of economic development. The IRS is giving tax breaks to investors who invest in these areas and hold the investment for a certain amount of time. If you’re unfamiliar with Opportunity Zones, shoot me a PM. I have a presentation I put together around the topic that I can share with you.

    Just my two cents.

    Canesha

    0Reply
  • Andre' Arceneaux
    Rental Property Investor · Orange County, CA · Member since 2019 · 151 posts · 92 votes
    7y

    @Dimitri Paspalaris Depends on what your holdings are and the volatility. I am a dividend pig in all weather with Div Aristocrat holdings and some low on Bollinger Band holdings that have jumped significantly with nice range to jump more when recovery happens (ie - ABBV, IIPR) .. I've turned to treasuries as buffers in the short term (ie - TLT), yet the market will always rebound (who knows if this is full on Bear or another manufactured correction), I wouldn't abandon the market completely.

    Holding in RE w/a diversified stock allocation works very well for me. Just my 2c

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y

    @Dimitri Paspalaris we pulled everything from our taxable account this week. We are leaving the retirement stuff long term.

    1Reply
  • Account Closed
    Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    @Dimitri Paspalaris

    What specifically are you invested in? Individual stocks? Mutual funds? ETF's? What has your return % been?

    I have a Vanguard Roth IRA (index funds) that has done awesome for me and wouldn't touch it unless I needed cash and an awesome deal was in front of me! Just remember if the market crashes, investors buy, they don't sell.

    Also keep in mind, ROTH's are great for BRRRR properties. Once per year you can take out 100% of your funds penalty-free so long as you put the funds back in within 60 days (I think). I did it last year. As soon as my refi closed, funds went back into my account.

    0Reply
  • Joshua Weaver
    Rental Property Investor · Beaumont, TX · Member since 2018 · 16 posts · 17 votes
    7y
    Originally posted by @Dimitri Paspalaris:

    @Christopher Phillips thanks for the insight. I already max out my tsp roth and roth ira. I am pulling out the 50k from my taxable funds. I do not have an issue paying the fees. I am just starting to see that re is just a better deal than stocks. Plus I have more control over the asset in RE than I do in stocks. 

    @Pat L. Thanks for the advice. What properties do you like to go get and what advise would you give a noobie like me? Thanks

    Chris,  When you say “fees”  i’m assuming you mean taxes and if you are under 59 1/2 the 10% IRS penalty.  Depending on your tax bracket you probably need to check with a local account to see how this will affect your tax liability for the year.  If 50k throws you into another tax bracket you may see most of that money going to Uncle Sam.  Just a thought.

    0Reply
  • Joshua Weaver
    Rental Property Investor · Beaumont, TX · Member since 2018 · 16 posts · 17 votes
    7y
    Originally posted by @Account Closed:

    @Dimitri Paspalaris

    What specifically are you invested in? Individual stocks? Mutual funds? ETF's? What has your return % been?

    I have a Vanguard Roth IRA (index funds) that has done awesome for me and wouldn't touch it unless I needed cash and an awesome deal was in front of me! Just remember if the market crashes, investors buy, they don't sell.

    Also keep in mind, ROTH's are great for BRRRR properties. Once per year you can take out 100% of your funds penalty-free so long as you put the funds back in within 60 days (I think). I did it last year. As soon as my refi closed, funds went back into my account.

    Dimitri, call your Vanguard rep and have him/her explain the rules for Roth IRA distributions. Your assumptions are only partially correct. I am a Finacial Advisor in my 9-5 but refrain from giving investment advice on BP but, seriously talk to your Financial Advisor at Vanguard. There are limits.

    0Reply
  • Account Closed
    Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    @Joshua Weaver

    I'm not Dimitri, but agree with you about him talking to his financial advisor. My previous feedback/post is what I did/do based off my finacial advisors guidance.

    0Reply
  • Tanner Marsey
    Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes
    7y

    Leave it alone. Diversification is key. Plus.... we may be at the top of the market.

    0Reply
  • Jose Cunha
    Member since 2018 · 1 post · 0 votes
    7y

    @Canesha Edwards I would love to know more about Opportunity Zones. Thought they were more beneficial to big developers and businesses. I’m just starting out in RE Multi-Fam, are there benefits in OZ’s to that end?

    0Reply
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