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Jorge Vazquez
  • Real Estate Broker
  • Tampa, FL
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RE Vs Stocks, discrepancy in investment behavior raises significant questions!

Jorge Vazquez
  • Real Estate Broker
  • Tampa, FL
Posted Feb 21 2024, 19:17

Here's a controversial topic! As someone who's gone from being a financial advisor to a real estate consultant for the past 20 years, I've noticed a disturbing trend regarding newer investors more and more. Why are people so careful and scared when it comes to investing in real estate, but when it comes to the stock market, they're way more laid back and trusting? Could it be because stocks seem safer to some folks since you don't have to deal with them face-to-face or manage them directly?

Take the tech world, for example. Startups can pull in loads of money without a solid plan for making a profit or sometimes any immediate income. This greatly contrasts the tough time real estate investments get, full of doubts and questions. It makes you wonder if we're all looking at investment risks and decisions similarly, doesn't it?

What is going on here? Are we being brainwashed? Why are the same biggest hedge fund companies diving more and more into owning real estate??? Wake up from the lie!

I would love to hear your opinion! 

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Chris Seveney
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Chris Seveney
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Replied Feb 22 2024, 04:04

@Jorge Vazquez

I would argue because public companies are regulated by the SEC and have completely different level of compliance than giving someone money to invest in real estate.

Yes there are public companies that have charges brought against them but it is no where near the number of real estate syndicators and scam artists and most of the real estate scams never get prosecuted because they are so small.

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David Ramirez#3 Wholesaling Contributor
  • Wholesaler
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David Ramirez#3 Wholesaling Contributor
  • Wholesaler
  • Tampa, FL
Replied Feb 22 2024, 08:51

Hey @Jorge Vazquez

I started with stocks before getting into real estate, so I've been there. At first, real estate seemed scary because of all the talk about money, prices, strategies, etc. It felt like you needed a lot of money to begin, which was overwhelming when you didn't know much.

On the other hand, figuring out how to invest in stocks is very straightforward. You can quickly look it up online and start investing in just a few hours.

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John Karg
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  • West Palm Beach, FL
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John Karg
  • Lender
  • West Palm Beach, FL
Replied Feb 22 2024, 12:59

Personally I think the returns for stocks vs real estate are in line with the risks and involvement associated with each. There is very little risk involved in holding an index fund for 10 years, and you are nearly guaranteed to get at least a ~7% return without having to do anything. An investment property bought with cash may have a cap rate between 5-7% and appreciate another 3-4%, giving a slightly higher 8-11% return. Purchasing with a mortgage can increase this return to 12-18% pretty easily. However, holding a single or multiple properties is certainly more risky and demanding than holding an index fund with several hundred companies. Therefore, while I think real estate certainly has more upside for those looking to get a higher return, it doesn't come for free, so I don't blame anybody that prefers to hold their money in the stock market. 

John

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Amber Stout
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Amber Stout
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Replied Feb 22 2024, 13:11

Jorge, great post and topic. I personally think the barrier to entry of stocks is so much lower than real estate. The masses do it, it's more accepted and feels safer. 

With stocks, it's simple. I could go on a platform right now and with the click of a couple buttons, I'd be the owner of stock. There's low barrier to entry in terms of effort required to purchase stock and naturally more people are going to do it. 

When it comes to real estate, there's more effort required and it would take actual effort to close on a property. One would need to connect with a realtor, lender, there's inspections, there's needing a specific amount of capital to invest, tenants, property management, etc. 

In addition, I think there's more "control" with stocks in the sense that you can pull your money out whenever versus real estate, the money is not liquid. 

What are your thoughts? @Jorge Vazquez