REAL ESTATE IS BETTER THAN STOCKS!
Rental Property Investor · Sioux Falls, SD · Member since 2019 · 129 posts · 138 votes
My personal finance teacher is using the Dave Ramsey course and doesn’t agree with me that real estate is a good investment. Instead he teaches that stocks will make you a millionaire no matter what even if you don’t know what you’re doing, there is never a good reason to go into debt, and because Dave Ramsey went broke trying to invest in RE (which what he was doing was very dumb by the way). But these stocks have been around for what 10-20 years? Who knows if they will even be existent in the next few years?!? Shelter has been number one priority for all people before us, and will be after us. And land can’t be made anymore.
@Isaac Johnson
I’m on your side 100% however...
“If you argue with a fool then there are two”
-Doris Smith
Be careful bashing one investment vehicle versus another just because you don’t understand it. I make a much higher return trading options (derivatives on equities) than I do in real estate. This is a real estate forum so most are going to prefer real estate. Invest in what you know but don’t bash the other investment vehicles. They all have their place.
@Isaac Johnson
I think of it this way and maybe you’ll appreciate it. I look at Dave Ramsey as elementary school level of education. It is the foundation upon which higher level investing is built upon. He focuses on being debt free and having control over your spending and accounting. For example, how well would you expect to manage a triplex or a rehab project if you can’t stop from spending $75+/month on Starbucks when you make $10/hour. Take that class for what it’s worth and move on and let your teacher have his opinion. When your real estate company leases you a 911 in a couple years you can come back and do burnouts in the faculty parking lot.
Real estate has created more wealth than any other vehicle ever.
Dave Ramsey's advice is about keeping finances simple and controlled, very much targeted at people who need guidance when it comes to finance and investing. I think his advice for avoiding debt and investing in good stock mutual funds is good enough for the majority of people to at least get their financial life in order.
Rightfully he wouldn't tell struggling people who have huge consumer debts, little financial sense, and no savings to go out and buy rental properties....so his advice is sound and logical considering his audience.
P.S. If I could give advice to my younger self I would strongly recommend opening a Roth IRA and start funding it early with my student jobs.
@Michael H. I don't mean to bash stocks at all. I spend my money on stock martlet analysis books to read, I just get annoyed by my teacher who has a negative view towards REI.
@Joe Villeneuve. Actually you are wrong about Dave Ramsey. He did make millions in real estate but he lost it all because of bad investment strategy. Leverage is good but when the market goes south so does leverage. Dave is a smart guy you would be wise to consider what he teaches. It may not be your style for real estate investing but it is a smart life style. He is trying to help people who are so burden by debt that their life seems hopeless. He has been there to walk the walk. He can also talk the talk I don’t practice debt free but I am able to cover my debt if needed. Big difference.
@Joe Villeneuve. Actually you are wrong about Dave Ramsey. He did make millions in real estate but he lost it all because of bad investment strategy. Leverage is good but when the market goes south so does leverage. Dave is a smart guy you would be wise to consider what he teaches. It may not be your style for real estate investing but it is a smart life style. He is trying to help people who are so burden by debt that their life seems hopeless. He has been there to walk the walk. He can also talk the talk I don’t practice debt free but I am able to cover my debt if needed. Big difference.
So let me see if I understand this. DR made millions in REI, but then lost it, and your conclusion is that he made millions if REI?
Uh,...no. That's like saying you went to the casino and won $10,000 playing BlackJack, then lost lost it and ended up negative,...but you won playing BJ. No you didn't. You lost. Gain/loss isn't measured by where you were, but where you end up.
...and I never said DR wasn't good at what he teaches...when it comes to debt management. That's very important in life. However, debt used as leverage on REI, and debt spent in your personal life, are very different animals. DR is an excellent teacher on personal debt management, but that wasn't what we were talking about.
@Isaac Johnson
Teachers teach. Real estate investors go out and do it and make money.
Teacher is ignorant, shun him.
Be careful bashing one investment vehicle versus another just because you don’t understand it. I make a much higher return trading options (derivatives on equities) than I do in real estate. This is a real estate forum so most are going to prefer real estate. Invest in what you know but don’t bash the other investment vehicles. They all have their place.
How are you investing in RE then?
This is a stupid argument because they are different. One uses leverage and the other doesn't. The unlevered returns on real estate over the past hundred years have been about 2-3% per year. (slightly more than inflation). The stock market averages about 10% a year. If you could put 3% down on stocks, your returns would be incredible, but the problem is that if stocks go down you have to put up more cash. The same is not true for real estate so you can ride out the ups and downs without going broke.
My first condo that I bought, the previous owner had owned it for 25 years and it appreciated about 1.9% a year compounded. I bought it in 2000 and sold it in 2003 and tripled my money (a compounded return of 54% per year if it was unlevered, but much more since I only put 10% down). So a lot of the super-normal returns are based on timing, not leverage.
Like I said, it's totally different. It's like saying, which would win in a fight, a lion or a shark?
I laughed when I read this.
1 - You can't just arbitrarily take out the leveraging of REI. It's one of the things that makes it so powerful.
2 - You can't compare anything using averages...especially averages over 100 year periods. Who invests for 100 years?...and averages are misleading at best. An average is based on good and bad investments. If you analyze RE correctly, you can avoid the bad investments, and if you find yourself in a bad investment, you can bail out and reinvest in a different investment.
3 - You have much greater control over your REI, where you have absolutely no control over anything in the Stock Market...other then getting in or out.
4 - Percentages lie, when applied to REI
@Joe Villeneuve buy and hold
@Isaac Johnson most financial advisers caution their clients against investing directly in real estate for several reasons: One is that most financial advisers are actually just salespeople for investment products which don’t include real estate, but another reason (the one worth paying close attention to) is that a majority of new real estate investors will fail, lose money, and quit after they realize that it takes work and includes periods of major setbacks. Owning stocks probably is a safer investment plan for most people. Anyone can buy an ETF like SPDR or Vanguard that is diversified and low risk with very little effort and make consistent returns with much more liquidity and less risk than owning actual real estate, so that fits more people’s investment goals than starting a new career or at least putting work in to learn all the ins and outs of running a real estate investment business. Ever since the introduction of ETFs and mutual funds it’s very easy to buy stocks without needing to be an expert. You don’t even need to understand the businesses you’re buying shares of, just buy into a diversified holding that is professionally managed, set it and forget it and make solid returns with zero effort. Not sure what you mean by stocks have only been around 10-20 years? The NYSE started in 1792, and aristocrat stocks by definition have increased their dividend payouts every year consecutively for at least 25 years and many of them have been around for centuries. Most of the advantages people claim only exist in real estate (having control, being able to use leverage) also exist with stocks if one chooses to learn how to do it. I wouldn’t fall for the trap of believing there’s only one way to invest: just as financial advisors will steer you away from real estate in order to sell you investment products, if someone is steering you entirely towards real estate, look at their profile and it’s highly likely they are selling real estate, probably as a turnkey provider, syndicator, or selling books on how to invest in real estate, running a website for real estate investors, etc. It’s not an either/or scenario, I’d recommend not fully trusting anyone who steers you entirely towards one or the other and investing in both stocks and real estate as each has its advantages.
This is precisely why I love syndications. I've done it, and live on the income from those investments. It's crazy, and I don't lift a finger, and get the tax benefits and the appreciation. The paper losses offset other rental income as well. It's the best of all worlds if you do it right.
@Isaac Johnson fyi DR has a huge portfolio of paid for Real Estate. He’s not anti RE but he’s anti leverage on RE. I think it’s much easier and straight forward to teach the masses how to invest in mutual funds vs invest in RE and it’s extremely difficult for most to buy RE with cash, ie no leverage. It’s not bad advice at all imo though admittedly it’s very conservative. And FWIW the biggest factor in one becoming wealthy is their savings rate, not necessarily what they invest in. So investing in either puts people way ahead of the game imo. That being said, I’m a huge fan of investing in RE vs the stock market if I had to choose one!