All Forum Posts by: K S.

If this discussion was even close I could understand the give and take, but it's not even a close comparison. REI is hands down the best investment for the majority of investors.

How close is the comparison?
Two runners start at the same time. One is running 100 meters and the other is running 1,600 meters. Who will finish first? No comparison.

1. Risk Reward- as I stated earlier the S&P 500 P/E ratio is almost twice as high as real estate at a 7 cap. For a 100% return on the S&P it would need to go from 33,000 to 66,000. A 200,000 or 2mm house would need to go to $400k or $4mm. Houses at this moment have a far greater chance of doubling than the S&P. On the Risk side, again at this moment in reference to the OPs question. The S&P has a greater chance of losing 1/2 its value than homes do. I don’t think any of us own &2billion dollar buildings downtown NY, SF, etc, so I will leave that out of the discussion.

2. Tax free gains- primary 2/5 years up to $250k per spouse versus 2% tax free munis.

3. Leverage- as mentioned over and over again REI wins. I can take $100,000 and do $1mm deal and make $500,000 in 2 years in REI. In the stock market I can take $100,000 and in 2 years let's say make 30% or $30,000. REI wins. You might say crypto or the next google and I would tell you your gambling. I can rinse and repeat all day long and get the same returns. Can't do that with stock picking. If someone says investing with Margin calls on stocks is comparable, you shouldn't be in this forum with us little guys. You need to be with the
$50 billion plus crowd.

4. Unfair advantage- homeowners and investors have unfair advantages over Financial investments. Both from finance standpoint, deductions, rent for equity, etc. The US government intentionally made it that way.

5. Liquidity- normally Financial investment liquidity versus REI would be a good thing on the Financial investment side. Unfortunately people tend to follow the cowherd. They buy high and sell low. It's harder to get in and out of REI so it is better

For the average investor.

REI is hands down the better investment from both a Risk Reward standpoint. Even more so to the OPs question about at this time.

If you have been unsuccessful or dissatisfied with your REI strategy let’s discuss your specific examples.

Yes today's REI market is harder. We get to see who has swimming trunks or is naked at this point.

Arguing that you feel like the stock market can't double but your 2M house can is not an argument based on facts. It's a feeling.

And I'm surprised that you think the RE market can't crash 50% when it crashed 50% between 2007-2012. Huge discounts in San Diego. The condo I purchased in 2012 for 140k was a short sale previously sold for 375k and that was the story of the entire city. Since then, RE has doubled and trippled but the market has quadrupled. Real estate is barely hitting it's 2007 peak just now 15 years later in San Diego.

The difference between Real Estate and something like the S&P500/401k matching is that the market is the same for everyone who's passively invested yet with Real Estate, you can buy a two houses in in different zip codes and you can have two completely different outcomes. Buying a house is like picking an individual stock. It could beat the market or it could just be a liability.

So I'll say it again, we only hear people talking about their 2012 success stories but we never hear about all the underperforming homes creating a sort of survivorship bias.

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Quote from @Carlos Ptriawan:

Quote from @Henry Clark:

If this discussion was even close I could understand the give and take, but it's not even a close comparison. REI is hands down the best investment for the majority of investors.

How close is the comparison?
Two runners start at the same time. One is running 100 meters and the other is running 1,600 meters. Who will finish first? No comparison.

This is where things get very interested. From a historical perspective the appreciation of real estate and stock market index is just following money supply in circulation, so they should react the same.

However if I can put additional Pro and Cons for each.

Advanced Stock Market and Index Pro
- we invest with other people so it's "bit" safer, meaning if the market is crashes it would not take too long to recover
- there's always an opportunity whether the market is up or down to make money
- position can be hedged, market tank by 50% no problemo , in real estate this is hard to do, not to say almost impossible
- could create an almost riskless position to create our own dividend > 15% annualized.
- I could create an arbitrage position where 7% margin to be re-invested into 15% dividend.

Exactly, people in real estate compare advanced real estate techniques requiring a lot of capital and 10 year old investments to basic passive market returns because they don't understand it. Comparing apples to apples, you can't say RE hands down because you can easily 10x your stock portfolio as well.

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Quote from @Carlos Ptriawan:

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@K S.
I don't understand the statement that the the broad market index fund returns over the last decade or 100 years was luck. You can say the same for the real estate run over the last decade as well.

Yes I admit being extremely lucky in RE the last 30 years and having been unlucky in the stock market. I think the stock market is fascinating but I am too slow on the uptake getting in on the big winners. There are no guarantees going forward. To me RE is a hands on business where stock investing is just that investing in someone else's businesses. My base is RE and cash and stocks are my speculation. I am more interested in return of capital than return on capital.

Why are you comparing your personal RE or house against your individual stock pick and not the broad market? You would never have lost if you just invested in the broad market in any decade in the last 100 years.
If you want to compare it to individual stocks, then stocks beats RE hands down as TSLA and hundreds of other stocks have skyrocketed. We should try and stay away from personal anedotes whem comparing investment vehicles. Real Estate has averaged 4% returns and index funds like VOO have been 8% with no effort. That is like for like without leverage and without knowing about individual stocks.

So answer the OPs question, traditional buy and hold a house off the MLS is one of the worst investments today for most people as prices and interest rates are up. The amount of capital you have to raise to leverage yourself would be better off spent in the S&P 500 or employer matching 401k. Nobody wants to trap their money in a house and break even for decades while renting their so so C neighborhood home to a stranger and everything that comes with that.

What is real estate return when you add on rents? What if you can break even for 4 years while leveraging real estate at 20% assuning 4% appreciation? According to the rule of 72 you are doubling your money. I don't see any opportunity for a normal person that can touch that in any other asset class.

- with househack, we literally mortgageless and live for free , stock index can't do that lol
- lets say we live in CA but kid wanna do college in TX, we buy RE in TX and househack, almost mortgageless again

The stock market can't do that because it's a made up fairy tale in todays market. You're not going to rent your couch out to a stranger living near your kids and completely pay the mortgage in todays market. By the way that's kinda wierd unless you have a legit ADU with separate entrance, STS walls etc.

I just sold my 500.sqft condo in San Diego. Total costs for the new owner is $4,800/month but I was renting it for $2,400 before the sale. That's a difference of 28k/year.

Investing the savings of $28k/year for 10 years in a broad market index would net $560,000 meanwhile that same condo would net you $300,000 including princpial paydown and 4% appreciation.

Real Estate: $300,000 vs Stocks: $560,000. That's a 260,000 opportunity loss after 10 years for buying my condo instead of renting it.

But that owner of the $4,800 mortgage (The bank owns the house) is still losing 2,400/month in opportunity costs. The intersect between increasing rents vs mortgage could take decades.

So there's a real world example for you guys. Buyer beware if anyone thinks it's best to just buy a house, rent your closet to some stranger and bling, free mortgage!. You may not be able to house hack a stock, but you do have opportunity costs overall that have to be weighted with the end results of both investments at the end of 10, 20, 30 years or whatever your goals are.

If the buyer that purchased your condo purchased it as an RE investment I question his intelligence. If the condo was purchased to owner occupy, the example has zero merit for this thread that we are referring to RE investments. Not a relevant real world example.

Note 4% appreciation if leveraged at 80% LTV is a 20% return from appreciation.

I'm not sure why so many people mention this without acknowledging that you will be underwater with just 20% down in major cities or anywhere appreciating especially in San Francisco as Carlos mentioned and at current prices and interest rates. 20% down does not equal 20% returns. That is overly simplistic explanation straight out of rich dad poor dad book. Therefore, it does not invalidate my example as you said or rebut my own without that disclaimer.

Hi KS, on average RE market is appreciating at 3-5% right now, there're some exceptions like a condo. A condo in bad location such as in San Francisco has problematic return, but that problem is very local (eg: a sold 1/1 was 400k in 2004 and now in the market for $500k-ish).

But in general, detach single family has appreciation faster than inflation rate, that itself is money making.

now combined with househacking, the house is becoming mortgageless.

househacking is becoming more common these days due to inflation and also being endorsed by the gov. ; it is not something that's uncommon like in the 80s.

So if you see my reply, the single family can be used as "saving mechanism" as well as "generating income". As saving mechanism, the real estate is awesome, I purposedly buy RE in good school district or in okay distance to major university, so kid not need to be in dorm and they can stay inside our family home, that itself also is super awesome to save money.

I would say I live for free in United States and giving my kids free education until university level, thanks to residential real estate.

I personally like condos with low HOA because of much lower price and expenses. I had an HVAC coil, light bulb and toilet handle replaced in my condo in the last 10 years. HOA insurance pays for roof and parking gate etc. It felt almost like a hotel in convenience. Paid off and no expenses so you can live a decent life on a retail job. Of course someone will say buy 10 of them and rent that out but most condos in todays market in major cities require at least 50% down to break even and like the real world example I gave, buying turns out to cost twice as much as renting at present meaning since the mortgage for the new owner is $4800 and renting that same unit is $2,400, you can invest the difference and come out ahead in in the 10 year example I gave. That is just one extreme example but I don't see houses in SoCal doing much better as nicer homes are minimum 1M to 1.5M i.e. Carlsbad and Tierrasanta.

I'm not sure what to think about house hacking if you have a family unless you have separate ingress/egress and STS walls etc but I understand you can make an extra few hundred bucks a month. I guess I would factor in the price of the ADU if doing it right. I'm trying to build ADUs right now but they restrict short term rentals for the entire lot that you build one on which makes it difficult if you live on a multi-unit zoned property.

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Quote from @Dan H.:

Quote from @K S.:

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Quote from @Carlos Ptriawan:

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Quote from @Jeff S.:

I just sold my 500.sqft condo in San Diego. Total costs for the new owner is $4,800/month but I was renting it for $2,400 before the sale. That's a difference of 28k/year.

Investing the savings of $28k/year for 10 years in a broad market index would net $560,000 meanwhile that same condo would net you $300,000 including princpial paydown and 4% appreciation.

Real Estate: $300,000 vs Stocks: $560,000. That's a 260,000 opportunity loss after 10 years for buying my condo instead of renting it.

But that owner of the $4,800 mortgage (The bank owns the house) is still losing 2,400/month in opportunity costs. The intersect between increasing rents vs mortgage could take decades.

Note 4% appreciation if leveraged at 80% LTV is a 20% return from appreciation.

You must be a troll as 1) you quoted me stating so many people fail to mention that many purchases at high LTV despite my very next statement that you did not include indicating the challenges of finding a cash neutral property in many markets. How convenient for you to have left that out 2) your examples in every case leave out the multiplier that leverage would provide. In virtually every case there is an LTV greater than zero that achieves cash flow. So in virtually every case leverage can magnify the return from appreciation. 3) you latest example, seeing you did not deny it, was an owner occupied purchase and not purchased by an RE investor and therefore totally irrelevant to this thread.

Please do not selectively quote me Readers can go up one post and see my actual post. Selectively quoting to try to convince the audience of something is deceptive and shows the weakness of your argument.

Just because you have been unable to achieve outstanding returns from RE does not imply that it is impossible or that others cannot. BP is full of example of people who have created generational wealth via RE. Yet, somehow you think it is impossible.

I question if RE is not for you, why do you spend your time on a forum primarily dedicated to RE investing except to troll.

Good luck

I'm a troll because I challenged your 20% down = 20% returns statement? Maybe you don't like different viewpoints on this forum and would like to start a members only echo chamber for yourself to confirm your biases.

How am I not successful in Real Estate? My house trippled in value in 15 years and one of my condos doubled in the first 5 yet I still would have been better off investing in the S&P in a like for like scenario for which I gave an accurate break down using multiple online calculators against my own properties at present time.

If you want to give an actual example in todays market where you can put 20% down and return 20% after all expenses then I'm not stopping you but my example is my own whether it's with or without leverage. I can't change my story to reflect your world view.

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Quote from @Dan H.:

Quote from @K S.:

Quote from @Carlos Ptriawan:

Quote from @Eric Bilderback:

Quote from @K S.:

Quote from @Jeff S.:

I just sold my 500.sqft condo in San Diego. Total costs for the new owner is $4,800/month but I was renting it for $2,400 before the sale. That's a difference of 28k/year.

Investing the savings of $28k/year for 10 years in a broad market index would net $560,000 meanwhile that same condo would net you $300,000 including princpial paydown and 4% appreciation.

Real Estate: $300,000 vs Stocks: $560,000. That's a 260,000 opportunity loss after 10 years for buying my condo instead of renting it.

But that owner of the $4,800 mortgage (The bank owns the house) is still losing 2,400/month in opportunity costs. The intersect between increasing rents vs mortgage could take decades.

Note 4% appreciation if leveraged at 80% LTV is a 20% return from appreciation.

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Quote from @Carlos Ptriawan:

Quote from @Eric Bilderback:

Quote from @K S.:

Quote from @Jeff S.:

I just sold my 500.sqft condo in San Diego. Total costs for the new owner is $4,800/month but I was renting it for $2,400 before the sale. That's a difference of 28k/year.

Investing the savings of $28k/year for 10 years in a broad market index would net $560,000 meanwhile that same condo would net you $300,000 including princpial paydown and 4% appreciation.

Real Estate: $300,000 vs Stocks: $560,000. That's a 260,000 opportunity loss after 10 years for buying my condo instead of renting it.

But that owner of the $4,800 mortgage (The bank owns the house) is still losing 2,400/month in opportunity costs. The intersect between increasing rents vs mortgage could take decades.

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Quote from @Jeff S.:

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Quote from @Jeff S.:

@K S. you are assuming you are investing 100% cash into the stock market not diversified at all and just happened to get lucky with index funds.

I don't understand the statement that the the broad market index fund returns over the last decade or 100 years was luck. You can say the same for the real estate run over the last decade as well.

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Quote from @Bradley Buxton:

@Dave MeyerRegardless if the numbers the stock market seems to be more of a VC casino than a wealth building strategy.

Same can be said for the real estate market, the billion dollar industry of forums, books and training has propped up real estate by investors and institutions that resemble an overvalued stock that is not inline with incomes.

250k in the S&P 500 10 years ago would be 900k today with no effort. But a 250k house 10 yeras ago might be worth 500k-700k today. And today, you won't be leveraging yourself with the prices and interest rates we're seeing yet the S&P 500 still made 30% gains last year I believe.

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recomendation is noted for the designer

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All Forum Posts by: K S.

K S. has started 22 posts and replied 295 times.

Post: Is Real Estate Still the Best Asset Class?

Post: Is Real Estate Still the Best Asset Class?

Post: Is Real Estate Still the Best Asset Class?

Post: Is Real Estate Still the Best Asset Class?

Post: Is Real Estate Still the Best Asset Class?

Post: Is Real Estate Still the Best Asset Class?

Post: Is Real Estate Still the Best Asset Class?

Post: Is Real Estate Still the Best Asset Class?

Post: Is Real Estate Still the Best Asset Class?

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