RE Investing or Stock Market Investing?
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Originally posted by Kirk R.:
Donald Trump net worth $2.5B
Warren Buffet net worth $54B
Using that logic:
Forrest Mars, Jr net worth $17B
Jacqueline Mars net worth $17B
John Mars net worth $17B
Donald Trump net worth $2.5B
Clearly, opening a candy shop is more lucrative than investing in real estate... :)
18 Replies
- Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes13y
Trump vs Buffet is apples to oranges. Buffet is arguably the number 1 stock investor. Trump isn't even close to number 1 in RE.
Also keep in mind Warren buffet isn't really just a stock investor. He buys businesses. Often his purchases are for a controlling interest or complete ownership in a business. If you read Robert Kiyosaki, Rich Dad Poor Dad, or his Cash Flow Quadrant, he says buy businesses not paper assets like stocks and bonds. You might argue this is semantics but I say it is a subtle but important difference.
Real estate wins hands down, at least for creative active investors. You can't buy stock at below market. You can buy real estate every day at below market prices. I regularly make 15, 20 50 even 100% + returns in real estate. That is virtually impossible to do consistently in stocks.
Real estate has many other advantages, leverage, the ability to improve value, amortization, tax advantages etc.
Buy some Microsoft stock then go to go to Redmond WA and try doing some landscaping and paint the front door and see if you stock goes up.
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes13y
Buffet didn't make his money just buying stocks. He also bought companies he thought were undervalued or could be improved upon. Much like Real Estate he bought an asset improved it and sold it or collected cash flow. No way he could have become that rich just playing the stock market.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes13y
Housing has a utility stocks cannot offer. There is a much higher percentage of Americans that own or rent a house than own stocks. Owning stocks is optional but people must have a roof over their head. History has shown that real estate has been a major vehicle for building wealth throughout time.
- Contractor · Atlanta, GA · Member since 2012 · 176 posts · 103 votes13y
I like to have control over my assets. When you buy stocks or mutual funds you have no control, no way of increasing its value. You are just along for the ride, putting your faith in others to make your asset more valuable. I am not comfortable owning something that, because of something that happened over night in the Japanese or European markets, is worth 25% less today then yesterday.
- Investor · Rochester, NY · Member since 2012 · 316 posts · 102 votes13y
Trump and Buffet actually have similar strategies. They are buying businesses or RE which they have active control over. This is much different than a traditional stock or mutual fund buyer who simply invests money and has no control.
There are many people who instead of investing in Real Estate will invest in Small Businesses in their local community and actively participate in growing that business part time like many of us do with Real Estate. That would be similar to Buffet's approach, and could result in significant gains - but many of us would consider to be riskier than a real estate investment where the majority of your collateral is tied up in physical assets instead of inventory/systems that could go obsolete.
The Creating Wealth podcast talks about this exact question in a number of the episodes if you want another opinion.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes13y
Not a huge buying stock fan. With the amount of time it takes to analyze and trade properly I can do so much more with what I already am very good at which is real estate.
Both of the people mentioned above have real estate holdings. It's not all of their assets. The key with real estate is being able to tax depreciate and write down your growing income every year and then wipe it out as a stepped up basis leaving the properties to your heirs.
A refi out of equity is considered a loan so is not generally taxable.
Do you think the rich want to make a bunch of money only to give it to the government who can't balance 10 cents much less our national budget??
Many of my clients buying commercial real estate are exiting stocks and liquidating to cash because they feel the stock market it volatile and could dip back at any moment.
Buffett made most his money from management.
His investment return rate is quite low in a first class
trader's point of view.For most people, making real money from stock market investment is unrealistic.
It is much easier to make money from money management such as hedge fund management. This is why most financial
students nowadays want to get into financial careers.RE investment is more realistic to most people.
I'd say Trump made most his money from investment (including development).
Originally posted by Kirk R.:
Donald Trump net worth $2.5B
Warren Buffet net worth $54BUsing that logic:
Forrest Mars, Jr net worth $17B
Jacqueline Mars net worth $17B
John Mars net worth $17B
Donald Trump net worth $2.5BClearly, opening a candy shop is more lucrative than investing in real estate... :)
I personally like knowing that I have much more control over my RE investment than my money being at the mercy of many different factors. For example a week or so ago Gamestop lost about 20% of their value simply becasue Microsoft announced that the new Xbox will not be able to play used games. Like others have stated you can do things to improve the value of RE, you can't with a stock. I'm actually planning on selling off all my stocks and using it to purchase a rental
Trump might be the most famous real estate investor in the U.S, but he is definitely not the richest. I just looked at the Forbes Billionaires list and there is a guy named Donald Bren that they state is the richest real estate developer in the U.S .
Sure, he's not 'worth' as much as Buffet ...but that's a lot more than Trump.
As others mentioned Buffet didn't get rich trading his own account. He is not an "individual/retail investor" so to speak.
For every Warren Buffet , there are many many 'mom and pop' real estate investors that have built wealth for their families and future generations.
In real estate it seems one can become quite wealthy being an individual investor so to speak.
The stock market feels more and more like a gamble even if one does their research ,etc.
It's kind of crazy that millions of people invest in stocks via 401ks and other accounts , but don't even know what they are really investing in . I bet many of these same people would consider buying an investment property "risky".
Real estate seems like the much better option for building true wealth. Sure people say if you invest X amount per month in a retirement/stock account for x many years you'll be a millionaire. But how much will that million be worth by the time one retires?..
Also what about if you want to retire early, there doesn't seem to be any option for that investing in the stock market.
In fact retirement accounts will penalize you if you take YOUR money out before a predetermined 'retirement date' .
Thanks to all for the thoughtful responses.
Ned Carey making me think of painting doors and landscaping almost makes me want to invest in the stock market vs. RE.
J Scott LOL at the candy store. Anyone know any candy store mentors?
Joseph M very good point on penalizing you on taking money out @ predetermined date
Joel OwensThanks for the info on clients exiting market to commercial.
Dave Savage Thanks for the Podcast suggestion.
I think lots of people become millionaires paying off their homes over time or paying off a property that they operate a business out of. Just wonder how many become millionaires via real estate investing vs. stocks. Wishing there were some hard data/statistics on this. Or maybe how many hours spent vs. money made. I know Real Estate is supposed to generate passive income but it seems to take work. Discussion seems kind of opinion although not sure what data or statistic would make sense.
I know of one person that has gone bankrupt or close to trading stock options. I think there are many more RE investors that went bankrupt.
- Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes13y
Originally posted by J Scott:
Clearly, opening a candy shop is more lucrative than investing in real estate... :)I think in about 2008 most real estate investors would have agreed with you.
That is just too funny J
Kirk, I am not sure about the statistics, but pretty much everything I have read states that the main roads to wealth are business or real estate and being a real estate investor is a business too.
Also in my own reading of stories and interviews of millionaires or billionaires real estate very often comes up. it is very common to hear about an entrepreneur that invested in real estate and then used their profits to invest in an other type of business for example.
I haven't heard of any (or maybe very few) that mentioned they played the stock market in order to get that initial money.
A huge part of it is leverage. With real estate it's possible to actually control a property with 0% down (VA loans for example)
or for most people 3.5% down with FHA.Where are the lenders that will let me control 300,000 of stock for
$10,500? .. This is HUGE in my opinion.Also there are people today partnering with people that have money to share the profits and many aren't putting money down.
Have you ever heard of this happening in the stock market? Asking someone to put up all the money and you pick the stocks and will split the money with them? Of course this happens on wall street..but breaking into that world is much harder than partnering with someone on a property deal.
I am sure many of the investors that overpaid bought into the hype and bought properties that didn't cash flow did suffer. They were left holding the bag just like all the stockholders that were left holding bankrupt stocks. But I think many have probably also gotten back in and learned a lesson from that experience too.
- Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes13y
http://www.cnbc.com/id/46538421
"Warren Buffett says along with equities, single-family homes are a very attractive investment right now.
Appearing live on CNBC's Squawk Box, Buffett tells Becky Quick he'd buy up "a couple hundred thousand" single family homes if it were practical to do so.
If held for a long period of time and purchased at low rates, Buffett says houses are even better than stocks. He advises buyers to take out a 30-year mortgage and refinance if rates go down."
Any questions?
Mike M Good point about Buffett's statements from last year. It seems a lot of the big funds/private equity took his advice to heart and started buying up thousands of homes after he made these statements. Blackstone has spent 4.5million buying up 25,000 houses and then renting them out via Invitation Homes .
"In April, 2012 – with seed capital from Blackstone, expertise from property managers Treehouse Group and Riverstone Residential Group – Invitation Homes was born and began quietly investing."
Source: http://www.cnbc.com/id/100701436Interesting that they started April 2012 just a month after Buffett's comments.
- Wholesaler · Holiday, FL · Member since 2013 · 571 posts · 221 votes12y
Of course you can - and that is what any sensible investor is doing any time they buy shares. The stock market is often (some would argue: always <g>) irrational. And when a share price is irrationally low presents a superior entry point.
The problem with almost all stock market investors is their emotional involvement with their money. This is why people often tend to buy high and sell low. Buying when everything is crashing around you takes cold cast iron financial balls. Very few truly have the stomach for it.
That being said; it's not very hard to consistently do 15% in the market and never get out of your slippers. Which does have some allure. <g>
stephen
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Originally posted by Ned Carey:
. . . . You can't buy stock at below market . . . . - Wholesaler · Holiday, FL · Member since 2013 · 571 posts · 221 votes12y
Yes; I have a question or two - first of all: what's in it for folksy old Uncle Warren?
Clue: where was he with this advice before he owned mortgage provider banks and other companies and investments which will benefit from increased home sales? <g>
And although I don't know this yet - I am willing to bet that well before he started talking in public about the great benefits to be had in buying single family homes - he had a large stake in the single family home business. Warren isn't just Berkshire Hathaway - he does all kinds of deals on his own outside of Berkshire.
That reminds me: just yesterday I saw a Berkshire Hathaway Realtors sign in front of a house. Hmmmm . . . . <g>
stephen
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Originally posted by Mike M:
[url]http://www.cnbc.com/id/46538421[/url]
"Warren Buffett says along with equities, single-family homes are a very attractive investment right now.Appearing live on CNBC's Squawk Box, Buffett tells Becky Quick he'd buy up "a couple hundred thousand" single family homes if it were practical to do so.
If held for a long period of time and purchased at low rates, Buffett says houses are even better than stocks. He advises buyers to take out a 30-year mortgage and refinance if rates go down."
Any questions?
- Investor · Milford, CT · Member since 2012 · 592 posts · 285 votes12y
Both!!!
Since I don't plan on doing RE full time and only treat it as passive income I like to keep a balance of stocks and RE. Actually instead of doing wholesale or flips like many here do to get the initial down payments for buy and hold apartments. I buy/invest in stocks then take the proceeds and invest in multifamily properties.
I am a firm believer in 401k, IRAs, Roths, 529s, etc... as another long term buy and hold investment. I know the gurus and many here shun its use but I can't ignore the buildup mine has taken in the last 15yrs. My wife and I have always maxed our 401k contribution since day 1 of working after college ;)
My plan in the next 10 yrs is to have 1 million in stock savings (401k, IRAs) and 1 million in RE net worth.
Lately I have been researching new businesses I can startup and sell off.
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