Stock market correction, BitCoin collapse, and real estate

OP

Rental Property Investor · OKLAHOMA CITY, OK · Member since 2016 · 65 posts · 103 votes

8y

@Caleb Heimsoth I don't consider it an over statement based on historical data. The stock market corrects itself, crypto currency is 100% speculative at this point. Rental rates tend to move quite slowly and generally in an upwards direction. I don't think we will ever see a nation-wide rental decrease of 4% in a single day as the DOW did today. Additionally, I don't think we will see rental rates decrease 65% in any 2 month span as Bitcoin has just done..

If, for example, I decided to accept BitCoin or my December rent, it would now be worth less than half of the original value. I was just trying to make a point as to which investment vehicle has the best proven track record.

6 Reply

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OP

Rental Property Investor · OKLAHOMA CITY, OK · Member since 2016 · 65 posts · 103 votes

8y

@Christian Nachtrieb I can still bet you that it will not be worthless. And if "interstellar" travel and relocation of the human race is the only thing you can think of to make my property worthless, then I think I will be alright.

22 Reply

Christian Nachtrieb

Rental Property Investor · Medford, MA · Member since 2016 · 288 posts · 171 votes

8y

@Alex Owens I really don't think it's any more far fetched than saying the US stock market will go to ZERO.

7 Reply

Alexander FelicePro Member

Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes

8y

this is a pretty wild extrapolation

the stock market has ups and downs, today was a down

bitcoin is like any new speculative industry, it's volatile and subject to over-hype

real estate is boring buy consistent.

The stock market is just as likely to go to zero as real estate it. no one dismisses real estate as an investment vehicle.

I wouldn't **** on the equity market too much, the S&P rose in the last 8 years more than most real estate.

5 Reply

OP

Rental Property Investor · OKLAHOMA CITY, OK · Member since 2016 · 65 posts · 103 votes

8y

@Christian Nachtrieb I am not saying the US Stock Market will go to Zero. Of course that is absurd. I am saying the likelihood of any one individual stock going to zero is exponentially higher than an individual piece of real estate going to zero. Even if your house burns to the ground with no insurance, the land still has value. A bankrupt corporation cannot say the same for it's stock

3 Reply

OP

Rental Property Investor · OKLAHOMA CITY, OK · Member since 2016 · 65 posts · 103 votes

8y

@Alexander Felice This is exactly my point... the stock market has ups and downs and crypto is incredibly volatile. The point is that neither of those investment vehicles will put a consistent check in your pocket every month like rental income.

Also to your point on the S&P, sure the "value" may have rose more than the "value" of real estate over those 8 years. But you are not going to realize any of that value unless you sell your position. Real estate, on the other hand, is paying you each and every month and your debt on the property is decreasing each and every month. The appreciation or "value gained" over 8 years is only icing on the cake as apposed to the main course with your equities.

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Alexander FelicePro Member

Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes

8y

Originally posted by @Alex Owens:

@Alexander Felice This is exactly my point... the stock market has ups and downs and crypto is incredibly volatile. The point is that neither of those investment vehicles will put a consistent check in your pocket every month like rental income.

Also to your point on the S&P, sure the "value" may have rose more than the "value" of real estate over those 8 years. But you are not going to realize any of that value unless you sell your position. Real estate, on the other hand, is paying you each and every month and your debt on the property is decreasing each and every month. The appreciation or "value gained" over 8 years is only icing on the cake as apposed to the main course with your equities.

Most people on BP invest in real estate, and I would guess the majority of them for cash-flow positions. Everyone agrees with and loves rental real estate as a great investment vehicle. I just assumed there was more here than just echo-chamber ;)

In the meantime, I'll invest in both RE and equities.

6 Reply

Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

8y

Real estate and the stock market are both great long-term asset classes. One size fits all does not work for spandex pants or investments. You have to know someone's goals and abilities.

4 Reply

Ben Leybovich

Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes

8y

Originally posted by @Caleb Heimsoth:

I think making gross over statements based on one Day is a bit extreme.

In the future your tenants may pay rent in bitcoin or some other digital currency. In fact all paper money could cease to exist one day.

That would make the people investing in crypto now look prettt smart

Caleb - I think you may have misunderstood the OP. And by the way, I do not necessarily agree with his interpretation, but - these moves in the respective marketplaces did in fact take place, thus showcasing the volatility in those marketplaces. We are not necessarily speaking of price action here. But the volatility...

Sam Josh

Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes

8y

There is nothing to be surprised here. I repeat nothing. Last week was the right time to sell stocks and wait for the pull back. The market was over heated and everyone was siting on a pile of profits. So this is prudent profit taking and selling for most part but now accelerated by people also dumping their losses especially those who brought at the top. Oh don’t discount those computers that buy and sell at a record pace. Second Bitcoin. There is zero surprise here. When the shoe shine boy starts to talk Bitcoin, there is enough evidence to sell. Sad part was I saw too much dumb money going into this frenzy. I’d say the price decline is not unexpected. Lastly real estate. Well if this persists, I mean the stock market rout (which is likely it won’t persist) and the down dips below 15k, then we have a problem in Real estate. Otherwise relax.

0 Reply

Ray Lai

Investor / Vendor · San Diego, CA · Member since 2016 · 1k+ posts · 949 votes

8y

If you analyze the real estate cycle and compare it to the stock market cycle as a whole, real estate generally corrects about 6-12 months later when there is a significant turn in the stock market. Right now, it could still be a dip. If it's more than a dip and we truly enter a bear market, then you should keep some dry powder to pick up real estate when it goes on sale 12+ months from now.

Rents will only go down slightly as real estate drops so that's no big deal unless you're barely breaking even, but if you are, then you're banking on appreciation not cash flow...

Ryan C.

Buffalo, NY · Member since 2017 · 88 posts · 26 votes

8y

Alex Owens , god bless you for this post and amen. I’m a believer!

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

8y

Originally posted by @Caleb Heimsoth:

I think making gross over statements based on one Day is a bit extreme.

In the future your tenants may pay rent in bitcoin or some other digital currency. In fact all paper money could cease to exist one day.

That would make the people investing in crypto now look prettt smart

not that far off like downunder in In Ozzie land they basically do not use paper checques.. and can't understand why our tenants here in the US are NOT ALL on auto pay... and why their rent which is due on the 1st does not get paid on the second.. can anyone explain that ???

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Account Closed

Investor · Columbus, OH · Member since 2016 · 139 posts · 136 votes

8y

Proctor and Gamble going to zero would be like Preferred or Casto going to zero.

Alternatively, a penny stock going to zero is like the war zone property you bought for $500 from the land bank.

0 Reply

Account Closed

Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes

8y

@Jay Hinrichs It is depressing to compare the United States to the many countries with higher qualities of life. The fact we are not even top ten should be taught in school.

4 Reply

Scott L.

Investor · Flower Mound, TX · Member since 2017 · 182 posts · 198 votes

8y

Originally posted by @Christian Nachtrieb:

Also, what if we as a species ever have to face an "Interstellar" type situation where we need to re-home the human race to another planet... how much will your property in Oklahoma be worth then?

Yeah and what about the zombie apocalypse? The (un)dead don’t pay no rent, and the constable is likely to be turned early so no evictions either. Me, I spend all my extra cash on ammo and non-hybrid seeds. And my bug out vehicle. Ain’t going to kill any walkers with digital currency....no way man it takes a head shot....mannnnn.

13 Reply

Tim B.

Flipper/Rehabber · Pensacola, FL · Member since 2017 · 33 posts · 24 votes

8y

1st Dow dropped a lot but not more then the Real Estate market during the crash not that long ago.

2nd BitCoin dropped also like the Real Estate Market dropped.

So compare apple and apples.

Now if your talking RE Rental income then look at Apple and when their dividends hit if they change at all. I'll be they don't either.

And tell the people in Detroit that their property's won't go to zero.

3 Reply

Paul B.

Rental Property Investor · Dallas, TX · Member since 2015 · 501 posts · 504 votes

8y

Originally posted by @Account Closed:

Proctor and Gamble going to zero would be like Preferred or Casto going to zero.

Alternatively, a penny stock going to zero is like the war zone property you bought for $500 from the land bank.

If Proctor and Gamble (or any major employer, for that matter) drops to zero, that means thousands of tenants are going to miss rent the next month. There will be many landlords who received full payment last month, but should expect to receive zero for the next month.

Paul B.

Rental Property Investor · Dallas, TX · Member since 2015 · 501 posts · 504 votes

8y

I can't touch the money in my 401(k) for over twenty years. It doesn't matter what it does today (although admittedly I still follow the news out of curiosity) as long as it goes up in the long run.

If your tenant pays rent on the 1st, gets laid off on the 10th, but manages to find another job on the 24th, he might get you your rent on time the next month, and you wouldn't even know anything happened. But for a two-week period, your rental income on his home was going to be zero. As long as you get your rent when you need it, you probably didn't care either.

Short term volatility doesn't matter if you are investing for the long term.

4 Reply

Andrew Johnson

Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes

8y

Yes, let’s extrapolate stock market returns based on the period of a few days. Bit ignore the last 12 month or few years. So if the market goes up 500 points later in the week should it change an “investment thesis”? I would hope not. If the real estate market dropped 5% should it change that “investment thesis”? I would hope no. Crypto, however, is another deal all together. You’re not buying (theoretically at least) portions of future cash-flow. But I do love a good panic and hyperbolic statement :)

Spencer Gray

Syndication Expert and Investor · Indianapolis, IN · Member since 2016 · 591 posts · 808 votes

8y

Bitcoin is up 615% over a 12 mo period so have some perspective. All investment involves a degree of speculation, different strokes for different folks. Don't get me wrong I'm heavily weighted towards cash flowing hard assets, but that doesn't mean other types of assets are bad and only real estate is good.

0 Reply

Christian Hutchinson

Investor · Detroit, MI · Member since 2014 · 360 posts · 354 votes

8y

All stock market fluctuations prove is:

Have a diversified portfolio in the market (Stocks, Bonds, Treasuries)

Have a diversified portfolio in investments (businesses, P2P lending, savings accounts, gold)

Have a diversified portfolio in Real Estate (land, MF, SFH, commercial, urban, rural, multiple markets if possible)

Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

8y

Originally posted by @Alex Owens:

@Christian Nachtrieb I am not saying the US Stock Market will go to Zero. Of course that is absurd. I am saying the likelihood of any one individual stock going to zero is exponentially higher than an individual piece of real estate going to zero. Even if your house burns to the ground with no insurance, the land still has value. A bankrupt corporation cannot say the same for it's stock

There are locations in the Midwest that I can purchase a SFR for less than it would cost me to build the SFR. The land is virtually worthless. The house burns down I may be able to sell the land but certainly it will not be for much money. The last time I was in southwest North Dakota (admittedly not recently) there were decent homes abandoned as the area had a receding population. So even land with an SRF on it could be virtually worthless. Similar how much do you think you could have sold an SFR in Detroit for in 2008? How much rent do you think you could get in Detroit for an SFR in 2008? The Silverdome stadium sold for just over $0.5M (cost $55M in 1975 dollars to build which was over $200M equivalent worth when it sold for $0.5M). That included the land and the structure.

Land can approach worthless and so can structures.

I will agree that the stock market and crypto currencies appear to be able to fluctuate faster than RE. However that is in both directions. The stock market and Bitcoin have done exceptional if you look at their performance over the last year. So they dropped a lot after rising a lot. They are still up a lot for the past year and about even for 2018 (basically even for the last 1.25 months).

In addition the stock market is less hands on then RE even RE that uses a PM (3 of our units we use a PM).

To get money out of a publicly traded stock is easy, you sell it with a commission that is minimal compared to selling RE commision.

I have my RE investments and I have my stock investments. If I did not believe my RE investments would produce a better ROI than the stock investments I would not have the RE investments as they take more effort. So both RE and stocks have produced good returns but stocks take less effort and ideally RE produces the better returns (it has for me even though stocks have done great).