Stock market correction, BitCoin collapse, and real estate

71 Replies

Things that have occurred today:

Today the DOW dropped 1,175 points - marking the largest single-day decline in the index's history. The stock market has been on an absolute tear over the last year and many point to today as the beginning of the inevitable market correction.

Today BitCoin dropped below $7,000 - a decline of 65% since its peak just 2 months ago.

Today I received checks in the mail. Not for dividends on stocks I own or crypto currency proceeds; but rather for rental income on real estate that I own. I say this not to brag, but to put into focus the underlying and most fundamental aspect about real estate investing. IT IS REAL, IT IS TANGIBLE, and IT IS NEVER GOING AWAY. The stock market could go to 0, BitCoin could go to 0 - but real estate never will.

I say all of this because I hate seeing people dismiss real estate as an investment vehicle because it takes too much time and money to see results. I am tired of all of the "get rich quick" investors (speculators) out there who think they are on the ground floor of the next big investment. Look at what happened just today: your stocks fell, your BitCoin fell, my rental check remained the same. End of story. 

Just a thought for the next time you contemplate throwing $1,000 into BitCoin instead of Direct Mail. Results in real estate have been proven time and time again, you just have to be patient and trust the process. 

"I am not looking to get rich quick, I am looking to get rich for sure" - Grant Cardone

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

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?

@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. 

@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. 

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.

@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 

@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. 

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.

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.

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...

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.

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...

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

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 ???

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.

@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.

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. 

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.

Originally posted by @Jeremy Hua :

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. 

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. 

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 :)

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. 

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)

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