All Forum Posts by: K S.

How much are  you willing to bet? Did the s&p have infinite returns? I can't recall any period of time that one could put down zero and get 440k back via the stock market. I had zero down. This is not even considering the tax benefits nor the income derived from that asset over time. 

 Realized that I made a home run and kept that property for 15 years or so until my horizons broadened to bigger things. Bought it for 80k sold it for 440k with zero down. Infinite returns.

 sorry but can you please let me know your zip code of the rental that you mentioned above ? there's something that doesn't adding up ......

 He's trolling, that's it and all. That's why doesn't add up, doesn't have any cognizant sense, and just makes idiotic ranting replies. 

If you used 100k as a down payment your returns would be much better

This would have allowed you to leverage and buy a solid piece of property with high rents.

The main difference between the stock market and Real Estate is that a 100k investment in RE can get you an asset worth much more. This means that your returns are based not on only your cash invested but on the actual value of the real estate.

A 100 K investment in real estate can afford you a $500,000 property with 20% down . Now your returns are based on 500,000 if you’re looking at appreciation.

If you invest $100,000 into stocks your investment and your appreciation is only based on $100,000 or what is in there .

Don’t forget all of the write offs and cash flow. Also the ability to take money out of the property, tax-free, and retain that property.

The only thing you can really do is stocks is buy and sell.

Diversifying your portfolio is never a bad idea, but I don’t think I can get behind the fact that investing into the stock market is more beneficial than real estate if done right.

Quote from @K S.:

Quote from @Henry Clark:

OP.  Your original post.  You have several examples or statements.

1.  You paid cash $160k and now it will not perform better than the S&P if you sell.

Paying $160k for a house with no or little leverage is not Real Estate Investing.

A person would only do this if it was their home.  If it was your home for 2 of 5 years as your primary residence then $250,000 for one person is tax free capital gains.  Versus Stocks.  If the person did not do this, they would have paid rent with no return.  Even if they broke even, they are ahead when they sell.

If you rented it as an investment, then you need to include that income in your calc.  And only put $xx,xxx down.

2. If you took the same $160k and invested it, as a REI strategy your wealth would be far greater than any S&P return historically or going forward (see next section). We do Self storage, country subdivisions, getting into flex buildings and Teak plantations. With that same $160k. Self storage- we would expect a return of $1mm in 2 years. Plus our downpayment back. Country subdivision- expect 100% return in 3 year average. Flex- Expect $500k return in 2 years. Teak- expect $12mm in 10 years. The point is not the great returns. To get to this base had a lot of failures, but you persevere. But also you develop your own REI strategy and yes you succeed better than the first house you bought or any of the first deals any of us made.

3.  S&P returns.  Several angles to this.

A.  Evolution of human economies.  Hunter gatherer, farm, with horse, mechanized, agricultural, energy, computers, internet communications and internet.  The tech centered S&P is going from first entrance to commodity.  Potential for value growth is not there going forward compared to the last 20 years.  
S&P P/E ratio is about 25.  Subject to a temporary financial issue, which would be gambling, it is at a ceiling for value growth.

B.  Baby boomers-  see the chart below.  All those 401k dollars will or are moving to a high fixed income mix.  Foregone conclusion.  Those dollars moving out of the S&P will put downward pressure on the S&P value. The bulge between 55 to 70.

C. S&P leverage- you could have leveraged, but you probably would have gone broke on margin calls around 2010 and 2021. No leverage calls on REI as long as you're cash flowing. Banks don't want property.

4.  Average new investor at this time will lose money.  But like all of us they will have gained knowledge plus they won’t be as scared to jump off the cliff next time.

5. Anyone getting into REI goal should be financial independence. Should never evaluate whether REI is good, better, best based on one deal. If you have $10,000 there is no reason for you not to have $1mm in 10 years. If you're young and have $0 there is no reason for you not to be worth $10mm today dollars in 30 years.

There are many posts comparing stock market versus REI already. If I was 35 and had $200,000 in a 401k, I would pay the penalties and get $100,000 to invest. After I learned my strategy.

No, I did not pay 160k. I paid about 100k. It's selling for ~330k (ask). My cashflow was around ~160k over 16 years. Taxes alone would be around 70k, 25k renovation, closing fees etc around 26k but memory fades me now and depreciation recapture around $17,500. We figured it would take 4 properties leveraged at 25% down to equal the S&P 500. And this was not a bad location, it did average and rented at 1% of it's value despite being 2006. In fact, the Austin area didn't go through a crash that people keep assuming just because it was 2007. They had better lending practices than most of the country.

This math makes no sense and is the story is quickly falling apart. 

You say paid $100k, sell for $330k.    And S&P doubled over same time, yet saying S&P would make more. 

How is $100k more than $230k? 

OP.  Your original post.  You have several examples or statements.

1.  You paid cash $160k and now it will not perform better than the S&P if you sell.

Paying $160k for a house with no or little leverage is not Real Estate Investing.

A person would only do this if it was their home.  If it was your home for 2 of 5 years as your primary residence then $250,000 for one person is tax free capital gains.  Versus Stocks.  If the person did not do this, they would have paid rent with no return.  Even if they broke even, they are ahead when they sell.

If you rented it as an investment, then you need to include that income in your calc.  And only put $xx,xxx down.

2. If you took the same $160k and invested it, as a REI strategy your wealth would be far greater than any S&P return historically or going forward (see next section). We do Self storage, country subdivisions, getting into flex buildings and Teak plantations. With that same $160k. Self storage- we would expect a return of $1mm in 2 years. Plus our downpayment back. Country subdivision- expect 100% return in 3 year average. Flex- Expect $500k return in 2 years. Teak- expect $12mm in 10 years. The point is not the great returns. To get to this base had a lot of failures, but you persevere. But also you develop your own REI strategy and yes you succeed better than the first house you bought or any of the first deals any of us made.

3.  S&P returns.  Several angles to this.

A.  Evolution of human economies.  Hunter gatherer, farm, with horse, mechanized, agricultural, energy, computers, internet communications and internet.  The tech centered S&P is going from first entrance to commodity.  Potential for value growth is not there going forward compared to the last 20 years.  
S&P P/E ratio is about 25.  Subject to a temporary financial issue, which would be gambling, it is at a ceiling for value growth.

B.  Baby boomers-  see the chart below.  All those 401k dollars will or are moving to a high fixed income mix.  Foregone conclusion.  Those dollars moving out of the S&P will put downward pressure on the S&P value. The bulge between 55 to 70.

C. S&P leverage- you could have leveraged, but you probably would have gone broke on margin calls around 2010 and 2021. No leverage calls on REI as long as you're cash flowing. Banks don't want property.

4.  Average new investor at this time will lose money.  But like all of us they will have gained knowledge plus they won’t be as scared to jump off the cliff next time.

5. Anyone getting into REI goal should be financial independence. Should never evaluate whether REI is good, better, best based on one deal. If you have $10,000 there is no reason for you not to have $1mm in 10 years. If you're young and have $0 there is no reason for you not to be worth $10mm today dollars in 30 years.

There are many posts comparing stock market versus REI already. If I was 35 and had $200,000 in a 401k, I would pay the penalties and get $100,000 to invest. After I learned my strategy.

Yes I am looking straightly from job number only. The high job number in Austin and especially in Dallas is super awesome it has more than 100k job available. It's good city for young people to start career and real estate is still doable with price of 300k-ish.  

However for investment, as the demand is huge, the supply is also increasingly huge as well outpacing demand. I read somewhere in market stats that Austin has the lowest rentable unit to population ratio in the whole country, hence since supply is abundant it would affect the appreciation and total return as well, so I don't think Austin would beat up S&P in the next 5 years; but a county in Michigan may have more chance to beat S&P because of rapid SF demand in that particular county.

However if one is looking for job/career and more modest spending obviously Austin/Dallas is the choice. There're lot of known and unknown dynamics when choosing market to invest especially if we have target to beat up the S&P (which I am also participating in this last 15 years).

Decent analysis but incorrect because that is your unlevered return assuming that you bought the house cash. Do the same math, but with only 20k down on a 100k SFH and check the returns. Take that 100k and buy 5 homes, even by your own logic, you would be at 115k appreciation * 5 is 575k in appreciation. I hear ya, but the math ain't mathing. I 100% agree that people should invest in what they know and understand, and what they are comfortable taking on. Stocks are great for a lot of people, but the returns in the stock market, do NOT come close to the returns in real estate. You also failed to mention that for 30 years you were collecting rental income and reduced your taxable income with depreciation and other tax benefits.

The sidebar OP makes about leverage is really a huge part of the whole RE game. With leverage your capital appreciation portion (115k) happens 4 times (460K - not exactly, but just for ease of estimating). Not sure what your cash flow would be, but that combined with the numerous tax breaks available while you held, 1031, step-up basis and on and on.... and I think you'd be beat the S&P pretty handily. Not to mention the ability to tap liquidity by refinancing. If you want to increase your exposure to RE, refi tax free and get another house. Not really possible for a guy with 500k in SPY.