All Forum Posts by: Steve K.

Wait, what? The stock market absolutely does do that for people, in the form of dividends. Many companies even increase dividends in a downturn to keep investors from selling. All you have to do is hold, ignore the rise and fall of the stock price, and collect dividends (just like shrinking equity doesn't phase you as long as the $500 rent check clears). It's no different in stocks or RE. Hold, collect rent/dividends, and you're fine. For example LMT, WFC, WMT, WU, XOM, AAPL, BLK, CA all actually increased their dividend yield during the last crash. Those invested in solid companies with plenty of cash to weather the storm collect dividends and buy more stocks at a discount. Just like RE investors holding solid properties still collect rent (although rents may go down) and if they're brave, go discount shopping. That is if they aren't suffering evictions, foreclosures, vacancies, ARM's, loans being called, the one mill in town closing, etc.

Not too mention all the short sellers who made a fortune playing the swings this week...

RE is awesome but let's not be ignorant about how the stock market works and spread bad information just because we like RE.

(Sorry for the double post, my comment got lumped in with the quote, maybe a mod can clean this up for me?) @Mindy Jensen

@Account Closed On 9/11/18 Gilead (GILD) calls tripled overnight. It happens all the time. Last January call options on the same stock soared ninefold. Successful options traders can make way more than $70k on a single deal and triple, quadruple, 10x their money with the simple click of a button. If you don’t want to believe that, you’ll just have to stay in the dark on stocks forever. It’s my understanding that most subject to deals don’t involve any instant profit for the buyer, and there are always the pitfalls of sneaky overlooked liens, due on sale clauses (with interest rates rising maybe the banks will start enforcing these and then bye bye sub 2 deals), insurance, the property being a money pit, etc. I wouldn’t call it the safest sandbox for noobs to play in. This thread has been interesting but I think your time would be better spent researching options trading. You’d  do really well. You’ve dragged us down an interesting rabbit hole with this one, I think I’ve provided enough free stock advice at this point, and I’m out. 

@Account Closed A stock doesn’t have to triple in value for an investor to triple their money. Options traders can just as easily make money on the swing. You can’t just exclude options trading from the equation because you think it’s too complicated for new investors. Swing trading isn’t any more difficult than “subject to” deals. You may think it’s complicated but somebody else might think it’s simple and find what you’re doing complicated. So let’s not make up arbitrary rules as we go, let’s keep it a fair fight. From my perspective,  options trading is the stock equivalent of subject to, except far easier to get into for the average Joe than finding the rare homeowner who is willing to let a $270k property go for $9k. It’s also easier to replicate with regularity and scale because the market is so much bigger. There’s a limited number of distressed sellers out there looking to offload quickly and perhaps take a loss at any given time. You could probably tell us how many better than me but I would guess maybe a handful in each local market if you’re lucky? Plenty of sharks circling to compete with on those deals. Meanwhile there are some 45,000 publicly traded companies listed over 200 exchanges worldwide that options traders have to choose from. All those stocks went up and down over the last 30 days and swing traders could have tripled their money on any of them both rising and falling. Others bet wrong and lost money, just like in RE, as evidenced by the parties on the other side of your deals. 

3) Stocks don't have to go up to make money on them. Heard of short-selling?

@Account Closed 1) Yes you could lose money 2) Yes stocks have tripled in 30 days. Many, many times. why would you doubt there are anomalies in stocks, just like your deal is an anomaly in RE?

@Account Closed Okay just go buy these 10 stocks right now: XOM, NATH, BAC, NTRI, ROKU, BC, PFE, VMI, AEO, UPS.  Buy low sell high. 

Options trading and penny stock investing require literally pennies to get started in, and have minted many Millionaires. Margin loans are similar to mortgages but with much less interest. There are ways to get started in stocks with less money than 99% of real estate deals. 

Trading options or investing in penny stocks certainly aren't the most common strategies, or ones recommended for everyone, but then again subject to deals aren't that common either. 

With $10k or $25k you could cherry pick some sweet blue chips. Some of them will do down and a handful will smash your deal. Pick those ones. 

My serious advice would be to pick up some Vanguard or SPY high dividend yield ETF's and hold forever. 

@Account Closed Thanks for furnishing us with the sincere position of your polemic. Noble of you to steer the Lurkers down a path which you can verify leads to success. However I besiege you; don't undermine the ability of these same readers to have even greater success investing in stocks.

If I may borrow your audience for a moment, I would caution them to be wary of dubious rhetoric which states they don't have enough time left to invest in stocks, and that REI is the only way. If you look at both REI and stocks with reasonable knowledge of the many strategies endemic to each, you will see that there are actually fewer barriers to entry and more paths to success in stocks than REI, as well as fewer pitfalls. No income, no credit, no down payment, no patch of dirt, no problemo amigo.

By using the right strategies, beginning investors can get in on stock trading with less time and money than it takes to enter REI, and start building real wealth quicker. Options trading for example is actually similar to what you're doing in the way that the objective is to buy the stock for less than it's current market value, and you can buy and sell contracts, but it can be much more profitable much quicker if executed well. Just think of it as the stock market version of "subject to", except almost infinitely scalable. You did $70k in 12 hours, and that's awesome, but why not also do $7M in 2 seconds? (But I don't mentor and I don't coach.)

Your rags to riches story is heartwarming but pales in comparison to that of Chris Gardner, Phil Falcone, Glen Dubinn, Suleiman Kerimov, Philip Anschutz, and many others who went from extremely poor to extremely rich quickly using stocks with just a small side of real estate.

 If you lived on Wall Street instead of Central Ave., you might be having lunch with one of those guys tomorrow. Maybe you'd be dining on tartare and foie gras in Phil Falcone's 27 Story Upper East Side apartment worth a cool $50M (he also has a $40M villa in St. Barts). Phil started investing with absolutely nothing and became worth $2B within a decade. Who's to say one of these Lurkers of which you speak isn't the next Phil Falcone? 

REI has worked for you and that's great, but the aggressive claims about stocks are unwarranted. Different strokes for different folks, man!

In another life, I could see you being a great corporate raider, a master of mergers and acquisitions, a junior junk bond trader with humble origins who rose to command a massive hedge fund empire, amassing $Billions$ of dollars and owning whole city blocks of Class A apartments just for your personal residence, in addition to a private island in the Caribbean. But you chose REI, with nary a small side of stocks, and whether you're richer or poorer for it, the world will never know.

We’re seeing inventory pick up a little bit and time on the market increase slightly in the $1.5M and up range here in Boulder. But entry level $600k-$1M segment is still red hot with bidding wars and homes selling for more than list price. Same for MF investment properties. Sellers are still in control. There was recently a $1M price drop on a $10M listing, not sure that indicates a buyers market unless you’re shopping for a $9M mansion though lol.

@Account Closed

You've stated that you make your living by solving people's problems. Problems that began when they bought real estate. They're stuck with an illiquid asset and don't have time or for whatever reason are unable to offload it for what it's actually worth, so you capitalize on that. Meanwhile the S&P is up 10% YTD and savvy traders have easily made 20%. If they needed to liquidate their stocks they could do so with the click of a button. We see so many people on here desperate to park their money in RE: investing blindly in out of state turnkeys, negative cash flow appreciation gambles, overpriced dilapidated money pits, quitting perfectly good jobs to try wholesaling, etc., so many of them would be better off buying high dividend yield ETFs IMO. 

Personally I try to avoid over simplified binary thinking like "Real Estate good so Stock Market bad". I do see your point however that REI has an advantage in being able to use other people's money, sweat equity, subject-to or other various niche expertise to build wealth from nothing. That seems to be the case for you personally, and congrats btw. But that doesn't mean that techniques don't exist to build wealth from nothing with other methods, including stocks. Essentially what you've done is built a business and RE happens to be your market. Why compare what you've done with investing in stocks when anyone can start a business in any field that they're uniquely qualified in and be successful even with a small initial investment?

You've had success in RE, but it didn't happen in 12 hours. You have probably invested many hours perfecting your craft with deals that broke even or even lost money. If you'd spent that time learning about stocks and ways to invest with little cash, you'd likely have found a way to be successful in stocks too. 

If we're truly looking to compare stocks with real estate, every study I've ever seen has shown stocks beating real estate in average returns. Of course nobody wants to be average, everyone wants to hit the home run and beat the market. This is where people get in trouble, thinking they can out compete all the other sharks in RE or computers that run algorithms to trade stocks. With this in mind and knowing that RE is a lot more hands on, which is both more room for error and more time spent, then logic tells us that if one wanted to limit themselves to one or the other for whatever reason, and the goal was return on time invested, then stocks clearly win. I prefer both: 70% aristocrat stocks for truly passive income, 30% value-add long term buy and hold RE that has basically become my job. For people new to investing or looking for a truly passive investment I always recommend stocks first because buying an ETF is a lot harder to screw up than buying real property, as evidenced by the deals you're finding which you source from people who screwed up RE deals. 

I guess I'm the yin to your yang: I don't think most people should jump in to REI unless they already have a robust stock portfolio providing substantial dividends and/or vast cash reserves so they can afford to dig themselves out when a sewage line clogs, a deranged tenant trashes a unit and has to be evicted, they miscalculate the ARV by more than their profit margin because they forgot to double their back of the napkin rehab budget, tariffs cause the price of lumber to double during permitting, or something expensive and unexpected inevitably goes wrong. Owning real estate is more expensive and prone to catastrophic failure than owning dividend stocks hands down in my experience.

Your post provides examples of how RE can be risky (all the people selling to you at a huge discount), and demonstrates how the investment class has become more exclusive over time (ability to buy the market/ save up for a down payment becoming less achievable using average wages), but you have not built a case for how investing in the stock market saps your wealth. Maybe the moderators can edit the title to "How investing in real estate saps your wealth". 

That said, thanks for sharing your story and some of your secret sauce. This thread has been provocative which I suspect was your underlying intention.