How long did it take you to live off of your properties?

General Real Estate Investing
41

Largely, to diversify. But, in addition to diversifying my assets, I’m sick of working for someone else. I get to work at 6:30 am and get home at 6pm on the 2-3 weeknights each week I don’t entertain. When I entertain, midnight is easily the norm, if not later. I’d like to spend more time with my family and build a business. There is nothing more exciting to me than being able to build my own business.

I am paid well for what I do-- but I would be out of a job in a nansecond if I lost a decent chunk of P/L. Trading has become a lot less fun-- I’m not as interested in it than I was. REI is, at the very least, a new opprtunity, that I can eventually work for myself. By no means am I bashing RE-- I mean, obviously I’m here and busting my -ss trying to learn REI so I can stop trading. It’s a new challenge. WHile I want to invest to make money, I would take a significant paycut to have my own successful RE business. Why? What does money matter if I don’t have time to spend it or spend time with my family? Freedom to work how and when I wish is worth a lot more to me than “big bucks”.

42

Danny, no disrespect, but as you admitted, you don’t understand equities. As such, it kinda makes it hard for you to judge them. Your view of the equity market is very limited. Equity values are not based on what someone else paid, but is rather similar to the income approach in RE. Saying differently just ain’t so. Sure, there are dopes who don’t do their homework or due diligence and get burned… but thats no different from any other investment.

Having said that, I’m not here to discuss the merits of equity investing. It’s certainly not as you perceive them. I am, however, here to learn as much as I can about REI. I appreciate your insight into it-- I have found your posts to be informative and with great content.

43

Without a doubt, I am unqualified to answer questions regarding equities, that’s why I don’t go on stock trader websites. Evident from your username, you are equally as unqualified to compare REI to equities as you are probably not seasoned in real esate.

Danny,
I’m sorry but where did I tell anyone that RE was NOT a good investment?..Not anywhere…Don’t put words in my mouth…I don’t go around telling others so matter of factly about how and why they shouldn’t invest in RE,do I …I didn’t think so…You did and it’s laughable at how unknowledgable you are about the equity markets…Juts by this funny line “The cross-your-fingers method or pray-to-god method of investing doesn’t work for me. I have no doubt that you can make great amounts of money by crossing your fingers, but I’m more comfortable with math”…That why the sharpest quants are hired by top firms…The markets is all math and probabilities…LOL…I won’t go on anymore you are doing a good enough job…

44

Rookie,

Are you drunk or can you just not read? Where in that quote did I say- you said RE is a bad investment? I was not putting words in your mouth. You and NJRE are on an REI website, new to REI, and preaching how great equities are in comparison to REI. You obviously have the equities side of the debate down, but lack any knowledge to compare it to REI, just like I do with equities. This is the reason I don’t go to stock trader websites to preach how great REI is when I have no idea what I’m comparing it to. As you said, equities is all about math and PROBABILITIES, just like VEGAS! Where I’m from, we call that gambling.

NJRE,

Since you seem to be a half way decent guy, can you explain how stocks ARE valued?

45

Are you drunk or can you just not read? Where in that quote did I say- you said RE is a bad investment? I was not putting words in your mouth. You and NJRE are on an REI website, new to REI

Yes but my reason for answering is because you Mr.RE pro is talking nonsense about equities…So yes Mr.RE newbie (being me) is going to answer you because just like you are a RE pro I’m an option strategist and have the same right to defend my profession as you…I don’t talk smack on RE,I like being here and learning but I don’t speak matter of factly about RE so dont do it about equities and we will be fine…Comparing equity investing to gambling is comical,maybe for the average guy who throws his money around without researching properly…But wouldnt the same problems happen to someone who didn’t research the RE markets properly…

46

How are stocks valued Rookie? There must be some relation to income I am missing. Companies must provide real-time earnings data to the NYSE as the price is constantly flucuating. I always thought the values were based on the actual supply and demand of the trading stock rather than the tangible income of the company. Of course, a company who doubles it’s revenue in a quarter will be more desireable, thus raising it’s stock price, but why?

P.S.- If there is anything factually incorrect with any of my previous statements, please correct them. Up until now it’s just been a food fight of opinions. I don’t think I was speaking matter of factly about equities. I admitted I know next to nothing about them.

47

http://www.valueline.com/vlu/2-stockvalue.html

http://www.fool.com/School/IntroductionToValuation.htm

Its a bit long winded but it covers it for the most part…Also may I friendly suggest you google * closed end funds*, I would bet you would like them as an addition to your current cashflow…They can be prchased at a deep discount to par value and you can also get capital appreciation all the while collecting dividends monthly that can have an avg annual yield of %7-%15 …And yes the higher the dividend the more risky the underlying asset/stock closed end fund…It doesn’t hurt to have different income streams is basically all i wanted to convey…I love any investment vehicle that can bring me income and capital appreciation,wheter its equities,Real estate,businesses etc…I mean well and mean no disrespect to anyone…I truly appreciate all the advice given here to me by you RE pros…I would be more than willing anytime to help/answer questions relating to the markets and my area of expertise when the conversation arises…Peace all. :biggrin

48

If you wanted to sit in front of your computer all day and traded on “news” then you could make a nice chunk if you knew what you were doing, in and out quick. Or you can get lucky and grab an ipo like microsoft and make a lot of money that way but if you want to turn nothing into a good deal of wealth using hard work and knowledge then real estate is definitely the way to go…

49

While the subject on equity valuation is much more than I ever could write on this forum, in many respects, in its basic form, it’s not all that different from the income approach in RE. Keeping in mind, that like income properties, people are willing to buy at different and possibly stupidly high multiples of earning. While you may think an income property is high at an 8X cap rate, someone else may think it’s cheap. No different from equities. If you’d like, I can write pages on it and refer you to various books.

BUT, I think this conversation is getting a bit off topic. I don’t purport to be a RE expert and you don’t purport to be a a stock expert. I admit I have a lot to learn in terms of real estate-- not sure how you can unquestionably tell either of us we are wrong, when you don’t have nearly enough facts to make some of these statements.

Anyways, I’m here to learn RE.

50

both of these are sure ways to lose a lot of money. this is NOT investing. This is speculation. Unfortunately, the masses think this is actually investing in stocks.

51

I’m a newbie here, but have been lurking on this site for a while. I would like to add some input regarding the equities/futures/options markets vs RE.

Based on empirical study the following has been found:

o Trading the markets is a zero-sum game – for every dollar earned a dollar lost.
o Institutions generally make money trading markets; due to better access to information, less sensitivity to drawdowns, and passive (unaggressive) trading.
o Individuals generally tend to lose money trading markets (lack of research, and aggressive trading).
o Generally, all major institutional categories (corporations, dealers, foreigners, and
mutual funds) earn profits before costs (transaction fees, taxes, etc.). Only corporations fail to do so after costs.
o Empirical analysis presents a remarkably clear portrait of who gains from trading the markets: Institutions win, and individuals lose.

For the personalities on this forum who claim to have worked, and consistently profited, on Wall Street, my assumption is that you traded institutional funds and not your own. If my assumption is wrong, then you should be proud that you are some of the very few individuals who actually profit consistently from the markets. (And in this comparison, consistency is an important consideration.)

If anybody is interested, there is further empirical data on the “buy and hold” strategy. Regardless of what fool.com and others say, this strategy is no more likely to work either. The probability of entering the market at the right time while buying the correct (undervalued) stock, and happening to hold it through thick and thin so you can beat market averages and exit at an appropriate time is highly unlikely. (That’s not to say that it doesn’t happen, but the point here is probabilities.)

RE is a business, built on something tangible. Treated properly as a business, applying appropriate business and financial decision-making rules, one is able to build both income and wealth.

Joey

52

TRADING IS SPECULATIVE! THAT"S WHAT I HAVE SAID! There is a difference between trading and investing-- HUGE DIFFERENCE.

Investing in equities is not speculative. If you bought an index fund, which is mindless-- you will earn average annual returns of 7-9%, how can you possibly say it is a zero-sum game???

I may not understand REI fully yet, but believe me, you do not understand INVESTING, not trading equities. If you do not understand equities, you can not say it is built on something intangiblle, and clearly you do not understand them.

Please… please can we talk about REI???

Btw, where did you copy that from?

53

Investing in equities is not speculative? What an odd position.

Tell that to investors of these companies:
RCA, Cisco, General Motors, TWA, Admiral, Pan Am, Merck, WorldCom, Merrill Lynch, AT&T, Polaroid, Xerox, etc. etc.

Had you bought any of these at the wrong time because they were “tangible equities” and you could have lost a lot of money. And that even includes those times when the equity was considered “undervalued.”

The point is: there are considerable risks to buying and holding stocks, even for long-term investors (btw, yes, I understand the difference between “trading” and “investing”).

And you say that the market is not a zero-sum game? Again, odd. That would imply that it would be possible for all winners to make more than the losers lost.

However, we do agree that it’s possible, even likely, to make an average annual return on a no-load fund of about 7-11%, sometimes even 15%.

But the question is, as I have read this thread, whether or not it’s a problem to have all one’s eggs in one RE basket. The point is that, outside of no-load indexed funds, investing in the markets is generally speculative.

Buying and holding as a (highly) profitable investment strategy is a myth.

Joey

P.S. Thanks for the compliment on my previous post. If you are indirectly asking for permission to use what I have written, then you have it.

54

Please… please can we talk about REI???

I totally agree …

Also take any of the the indices symbols (SPY,DIA,QQQQ) and put them on a yahoo chart and tell me where over the longterm you would have lost money?..Yahoo’s charts go back like 100 years…I await a valid response…As for day trading,no one should attempt it for the simple reason you need to lose money before you actually learn the basics and most average people do not have the stomach for such a high stress career,rightfully so…Trading for the non pro is a losing game,better off sitting down at the poker table with Johnny Chan and betting the kids college fund…You will have much better odds…

55

you’re 1000% correct. i agree wholeheartedly. equities are speculative. RE is not. the earth is flat. you win. in the end, all that matters in this debate is how much money either of us have made using our respective means. anything past that is just cheerleading.

now can we talk about RE?

56

:beer

http://www.alaska.net/~clund/e_djublonskopf/FlatHome.htm

57

Tell that to investors of these companies:
RCA, Cisco, General Motors, TWA, Admiral, Pan Am, Merck, WorldCom, Merrill Lynch, AT&T, Polaroid, Xerox, etc. etc.

Software Guy,
Is it fair to use the dogs of the past 10 years?..Any bonehead investor who knows nada about the markets will simply buy index funds and would never be tied directly into a single Enron or the above in their life…And if they were exposed to such a situation it’s their own doing or their investment advisor (which is still their own fault)…Anytime anyone invests their capital they should have a full understanding before committing one dollar of currency…People don’t do that…The average person doesn’t have the business sense to know when the train leaving the station mentality is tempting their hand (in real estate or the stock market)…I think the reason why RE is a less risky investment for the average person is that it’s not that complicated to understand,to properly manage is a different story…Stocks/indexes.ETF’s,CEF’s insurance vehicles when used correctly can be a tremendous source of income,and capital appreciation…But when used wrong can be an absolute train wreck…But lets keep in mind that anyone can get burned in anything…

A RE related topic…Recently a poster started a thread of being back after a year into his investment and was saying how he lost so much money etc on the deal…This is a guy who came to forums,researched his local market and then pulled the trigger on a duplex for 370k expecting a $1400 monthly rent roll to cashflow it…Point being even the easy stuff like RE can get complicated fast…I firmly believe that the current real estate mania has only fueled the train leaving the station mentality just as the internet boom of 99/00 did…People are jumping onto a fad that is now over run by pro’s speculators,risky mortgages,very high leverages,little profits to be made…The correlation is there and the rough times I firmly believe are ahead of this industry but I’m in it for the long haul…But as for the market I think when someone understands asset allocation fully it’s nice to park your money in a few good/solid areas…I’m not talking buying the next MSFT,GOOG,I’m talking a viable risk allocation suited especially to the individual…There is nothing wrong with being diversified properly…

58
Recently a poster started a thread of being back after a year into his investment and was saying how he lost so much money etc on the deal..This is a guy who came to forums,researched his local market and then pulled the trigger on a duplex for 370k expecting a $1400 monthly rent roll to cashflow it..Point being even the easy stuff like RE can get complicated fast..

RookieNYC,

Unfortunately, this is the norm for new real estate investors. The vast majority fail because they simply don’t understand the basics of running a business. In the case you described, the result was completely predictable. It all boiled down to a simple math equation that the investor either didn’t understand or chose to ignore.

Mike

59

This is the case in any investment which has seen above average returns. Every idiot hears of these returns and thinks money is easy to make. Unfortunately, for most people who enter any market in this way, their plan is not thought out well enough nor are they capitalzed enough.

60

Dude, you are painful.