All Forum Posts by: Kevin S.

 "I once read that the wealthy people use the stock market to beat inflation but real wealth is held in real estate."

I don't know where you read that but it makes no sense. RE is a far better hedge against inflation since it's a real asset. Many companies are negatively affected by inflation and their stock price will fall.

If you read my entire post rather than the snippet that was pulled out of it you will see my point was in response to a post that claimed RE will make more money but takes more work. My point is that if you don't put the work in then of course stocks won't offer you the return. There is a lot more to investing in equities than index funds and buy and hold and it takes a lot of work. The other point I made in this thread was that IMO treating these 2 investing areas as alternatives to one another is the wrong way to look at it. I would first look at what you are trying to achieve, if it's personal wealth then stocks are likely best, if it's generational wealth then RE is likely the best. People should aim to do both.

 Yea because they started those companies.  There's no person on that list that just invested in the stock market to get super rich.  Buffet is the closest but he has controlling positions much of the time and he is an operator.

 The two areas that you should research are "1031 exchanges" and "step up in basis" This should answer your question.

Sure, I would guess that most people not well-versed in property investments don't understand the amount of tax payable when you exit the investment. All the benefits you have obtained through depreciation must be recaptured leaving you with a surprisingly large tax bill.

 I've built the majority of my wealth as a trader and investor of stocks. Very difficult to do IMO for the majority by simply buying and holding index funds or even individual stocks. I trade mostly options and have shorted stocks but it's not my strength. There's nothing wrong with buying and holding stocks and you obviously could accumulate a great deal of money doing so if you start early in life. The way I think about stocks Vs RE would be stocks build personal wealth and Real Estate builds generational wealth, this would be my simple way to explain how I think of it. I have recently started to believe that it is less a choice between the two and more a way to diversify wealth with assets that behave very differently. Real property is also a great hedge against inflation. 

The USA has very friendly tax laws for property owners but they quickly swing against you if you decide it's time to exit the investment, passing it on to heirs is the way to create that generational wealth so once you commit to it then its a commitment for life in my opinion.

I think the big component is leverage. 

You buy a $1M asset that is leveraged at 80% LTV. Appreciation is based on the $1M, not the $200K.

The other component is no matter what happens to the property, you always have at least land value. You could invest in a company that goes under and you lose everything. Plus real estate is a necessity. People have to have a roof over their heads. I would make the argument that real estate is safer in a lot of ways.

 General contractors typically charge a percentage for their service. If a partnership is entered into then that fee would be waived. Easy to eliminate "double dipping", all partners get to review the invoices whenever subcontractors are hired. As far as compensation in the form of cash flow/equity, those numbers would need to be negotiated on a case by case basis. 

Real estate investing comes with its fair share of risks. 

How do you assess and mitigate risks in your investment portfolio? 

Share your risk management strategies and lessons learned.