Strategy for next 5 years: Sell Real-Estate and Buy Gold

Cincinnat, OH · Member since 2011 · 15 posts · 0 votes

This is the advice I got from a relative six years ago when real estate looked like it would never stop going up, gold was like $500 back then. He had liquidated most of his real-estate holdings (he owned several homes and apartment buildings) and sunk it all into gold. We thought he was nuts back then.

I saw him again few weeks ago before the market downturn and he said gold is going to $5000 and real estate has several years before it bottoms. He advised me to sell any real estate and put it into gold, does it still make sense when gold is at all time highs? I was looking into buy and hold and getting into the residential rental space, now I'm questioning if it's the right time?

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Jason S.

Investor · Diamond Bar, CA · Member since 2009 · 446 posts · 233 votes

15y

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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
15y
Chuck, I am by no means a gold expert but possibly a real estate expert. I would not think to buy anything when prices are climbing like Gold. Buy when prices are dropping like real estate. I personally buy real estate and silver as silver is much more affordable by the OZ. If Gold ever goes down then look at it again very closely. Maybe Gold will never go down to where is was a few years ago but its like anything else, its controlled by the government. If you have it keep it as back in the day owning Gold was illegal and the government stole it back from the US citizens.
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Rich Weese
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
15y
Two different investment gurus or brokerages stated they see gold at $2400 and 2500 an oz respectively by end of year. Rich
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Mitch Kronowit
SFR Investor · Orange County, CA · Member since 2009 · 1k+ posts · 1k+ votes
15y
How many gold bricks would I need to build a house to live in? ;-)
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Jason S.
Investor · Diamond Bar, CA · Member since 2009 · 446 posts · 233 votes
15y
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Mark D.
Lender · Pasadena, CA · Member since 2008 · 50 posts · 11 votes
15y
Today the ECB began buying Spanish and Italian bonds which is extremely bullish for gold. Also, watch Bernanke tomorrow and see if his language indicates further QE easing in the U.S. As long as central banks continue to buy government bonds, gold will perform well.
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Rich Weese
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
15y
Jason- fun chart! It is very interesting to see the strong rise in gold and huge drop in RE. I never thought I could buy a couple median priced homes with my little box of gold coins. Wierd comparison but good accompaniment to RE, imo. Rich
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J ScottPro Member
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Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
15y
Jason -

That's the best argument I've seen for buying real estate right now (and not necessarily buying gold)...good post!

For what it's worth, I was bullish on gold back when it was 700 an ounce. Bought a bunch of LEAPS (long-term options) in 2008, and sold them in 2009 after a quick run-up. It may continue short-term, but like any bubble, the drop is sure to be quick and painful for at least a few people...
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James Vermillion
Lexington, KY · Member since 2009 · 2k+ posts · 1k+ votes
15y
I am also not an expert on gold prices, but when I look at gold vs. real estate, I see myself being able to make significantly more with less risk by investing in real estate, thus, it is my investment of choice at the moment.
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Jim Stardust
Real Estate Investor · Cincinnati, OH · Member since 2011 · 119 posts · 59 votes
15y
If Gold is actually going to $5000, then yeah, sell everything, including your kidneys, and buy Gold...But no one knows where Gold will be in 5 years, let alone next year.

If you have $100K to invest and you can get 10% ROI in real estate, you can have something over $160K in 5 years. Gold will have to be over $2700 by then to give you the same return, will it happen, maybe, could Gold go back to $700, it may very well could. It's in a bubble right now, if you read (and believe) Harry Dent, he says Gold could be between $200-$400 in the not too distant future.
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George P.
Real Estate Investor · Baltimore, MD · Member since 2008 · 1k+ posts · 268 votes
15y
As far as I am concerned, storing your money in gold bullions does not provide any tax benefits, does not feed you with cash flow and is not eligible for like-kind exchange to avoid capital gain tax.
That's what it doesn't do. What it does though - it gives you hope that you are hedged against inflation. That is if its price keeps going up.

P.S. If you bought gold in the 1980's at $860-ish/oz, you wouldn't get your money back yet (in inflation-adjusted dollars).
Think about it.
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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
15y
Anybody can get lucky and time the market for gold or any other commodity, stock, and even RE. That said, I agree with George in that RE offers many other advantages that investments like gold do not. In addition, at least in my business model, I don't have to speculate and leave my investment up to others, with flipping RE, I control the market and investment by controlling my acquisition price relative to actual value and control the market by getting in and out within 3 to 4 months which drastically reduces potential for devaluation over time.
I can not do that with gold investments and I can not live inside of gold either.
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Kevin Yeats
Lender · Fort Pierce, FL · Member since 2009 · 825 posts · 486 votes
15y
Opinions ... especially investment opinions, are like noses. Everyone has one and most of them smell.

{ I was being polite so Josh doesn't police me }
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Account Closed
Los Angeles, CA · Member since 2008 · 557 posts · 70 votes
15y
Great post Jason -

That is sharp drop in real estate priced in gold. It looks like we're getting close. There is a dow priced in gold chart that should look similar. But we're not near the average yet for the dow priced in gold. In terms of both the dow and real estate priced in gold we'll probably over shoot.

I speculate that the gold bubble will end explosively like it always has. So far nothing explosive on gold's rise. Just a nice steady long uptrend over the last 12 years. I am looking for more "We Sell Gold" signs instead of "We Buy Gold" signs. It's getting closer to exit time. But definitely not selling yet.

I also agree with George. I don't see it as either gold or real estate. I like to view it as gold and real estate; slowly exiting gold for more real estate as our economic situation works itself out.

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Scott Hubbard
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
15y
In my market I can now buy homes for 50 to 60 cents on the dollar, spend 2k to 3K in rehab, then turn them over in less than 4 weeks with seller financing effectively doubling my money in 3 to 5 years when the buyer refinances. Additionally, I can cash-out 85 to 100% of my original investment in six to twelve months. Plus I get a monthly P and I payment. Gold cannot compete!

Additionally, your friend did exactly the inverse that he is suggesting you do. He bought gold at a bottom after selling real estate at its peak.

I think there are some fundamental flaws with this suggested strategy. I like gold too, but I think it is a much riskier investment than real estate. Gold producer's are no longer hedging against the price of gold falling. Also, I hear a lot of ordinary people (aka sheep)talking about getting into gold, both are bearish signs in my opinion. Eventually gold producer's will have to hedge which will be a sell sign and once all the sheep start herding into an investment, Wall Street pulls the rug out form under them.

Short term gold will not get much higher than $2200.00 and in five years it will unlikely be anywhere near $5000.00.
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Carlos Flores
Commercial Real Estate Lender / Syndicator · Dallas, TX · Member since 2011 · 888 posts · 309 votes
15y
I missed the last run on real estate, dot com, post 9/11 stock runs, and gold to name a few gravy trains. I am not missing out on today's buy/fix/hold real estate opportunities.
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Mitch Kronowit
SFR Investor · Orange County, CA · Member since 2009 · 1k+ posts · 1k+ votes
15y
Originally posted by Jim Stardust:
If you read (and believe) Harry Dent, he says Gold could be between $200-$400 in the not too distant future.

I believe what he says about studying demographics in regards to investing, but he missed a few predictions by a country mile, namely the DJIA reaching 40,000 by 2008. Still waiting. ;-)

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Rich Weese
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
15y
Again, comparing RE with gold as investments makes no sense, as I've stated SO many times before. For all the reasons mentioned here, RE does so many more things. I own gold as hedge for EXTREME possible failures of this country, and could care less what it is at on any single day. Rich
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Scott J.
San Juan Capistrano, CA · Member since 2011 · 114 posts · 34 votes
15y
To put it simply, gold is pure speculation. While real estate, to most of us, is not.

My properties would still be good investments if the price stayed flat for ten years.
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Robert Dobbs
Residential Real Estate Agent · Delray Beach, FL · Member since 2010 · 115 posts · 83 votes
15y
"Strategy for next 5 years: Sell Real-Estate and Buy Gold"?

That sounded like a perfect strategy for the 5-year reriod:

August 10, 2006 to August 10, 2011

rd
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Will BarnardPro Member
Moderator
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
15y
Originally posted by Robert Dobbs:
"Strategy for next 5 years: Sell Real-Estate and Buy Gold"?
That sounded like a perfect strategy for the 5-year period:

August 10, 2006 to August 10, 2011

rd
Isn't dthat the truth! Of course hindsight is always 20/20.
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Rusty Thompson
Real Estate Investor · Salem, OR · Member since 2011 · 422 posts · 149 votes
15y
I always hear people say they are buying gold in case of serious economic collaps.... if that happened money would be worhless... but to a certain extent so would gold. Anything is only worth what Some ones else will pay for it. And in that situation you might be able to buy enough food to feed your family for a week with that ounce of gold. In a true crisis the only things that have any true value are food, shelter & the means to protect it. Gold is only a good hedge against inflation ( as are a lot of comodities) not a colapse.
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Rich Weese
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
15y
Rusty- I'm of a different thought process. I have many posts and threads on here extolling the same list of important things you did.(food, shelter and means to protect it as well as water, and barter items such as soaps, spices, matches etc)
You listed my reason for gold/silver in your own post "you might be able to buy enough food to feed your family for a week with that ounce of food" . That is good enough reason for me and the barter I'm talking about. I only have junk silver and 1/10 oz gold coins. I'm comfortable with their trading value in ANY economic climate.
I've never suggested in any post/thread that metals are comparable to RE as an INVESTMENT, but have always suggested owning both if possible. I hope I'll never need to know how good of barter, metals are. Rich
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Kevin Yeats
Lender · Fort Pierce, FL · Member since 2009 · 825 posts · 486 votes
15y
Rich, Rusty,

I've discussed/debated this same point with friends. In a "economic collapse" if we degenerate to a barter society, the counterparties with whom you trade must accept what you trade with them and both side must agree that the trade is fair. If you want to witness this type of trading, watch Pawn Stars.

I'm not a fan of gold in a total collapse situation. It would seem to me that water or water purification devices/tablets would make more sense. As would canned goods, fuel, batteries and other necessities.

One problem with gold as a currency is the indivisiblity. At today's prices, 1/10th of an ounce of gold is still $150. You would have to buy something equally expensive of buy a lot of something to make the trade "fair." If we has total collapse, gold prices would potentiall soar further.

Also the seller of goods for your gold would have to accept your gold and not risk being stuck with a counterfeit. That is one aspect of dollars or Euros or any other currency circulating today ... it is accepted at face value.
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Darrin Smith
Investor · Crofton, MD · Member since 2011 · 35 posts · 2 votes
15y
great discussion!
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Chris Martin
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
12y
Originally posted by @Robert Dobbs:

"Strategy for next 5 years: Sell Real-Estate and Buy Gold"?
That sounded like a perfect strategy for the 5-year reriod:
August 10, 2006 to August 10, 2011
rd
August 10, 2006 Gold 635-652/oz.
...
August 10, 2011. Gold 1740-1800/oz.
August 10, 2012. Gold 1610-1625/oz.
August 9, 2013. Gold 1290-1310/oz.
August 10, 2014. Gold 1305-1310/oz.
Scoreboard relative to the topic at hand: REI : 1 Gold : 0
http://www.kitco.com/scripts/hist_charts/daily_graphs.cgi
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