Did anyone else read the May issue of Money magazine focusing on real estate? Particularly this analysis of real estate vs. stocks as long-term investments? The writer (Marlys Harris) concludes that stocks are better.
Real Estate investing and the stock market go hand in hand.
Let’s look at some history here.
1987 stock market crash. Money flows out of stocks and immediately into Real Estate. From 1987 to the early 90’s HUGE run up in Real Estate Values. That gets over done and like always, a correction occurs.
Early to mid 90’s. Housing prices fall and stocks start a run which brings the DOW from 2000 to 10,000.
2000…Tech bubble bursts and lights off and unprecidented Real Estate BOOM.
2006 Real Estate gets hit… Stock market continues to hit new highs.
You can do both and really increase your net worth. Rotating in and out of stocks/ real estate when conditions favor one or the other is a great way to improve results.
From 2003 to early 2006 I did not buy a single property. The prices were insane. When things get to a point where a property comes to market and receives 50 offers the first day it’s shown is not a market that can sustain itself.
I’ve been around the block a few times here. Those conditions are fantastic to sell into, providing you purchased the property BEFORE the mania starts. The problem is, and we are seeing it now, what do you do with a property purchased at a market peak?? It’s not worth what you owe on it, it will not cash flow, you lose, BIG! Look at Florida right now. It’ll be 10 years AT LEAST for that mess to unravel. Property taxes are outragous, insurance is up 300% in areas. These things don’t reverse themselves easily. Ever get a notice from your city or town informing you of the coming 200% property tax CUT??? No? me neither.
Patience is the key to any repeatable investment strategy. Anyone can get lucky once. Wealth is created by being in the right place at the right time with the capital to take advantage of overeactions in markets. That is true for stocks or real estate.
Sam Zell intrigues me. He got his nick name “The Grave Dancer” by buying real estate at market lows and selling into manias. When I say lows I don’t mean bottoms, no one knows where a bottom in any market is. But lows are different. Sam just sold about everything he had in commercial real estate holdings. That in itself is interesting to me. But… the buyer is just as informative. Who purchased Sam Zells real estate empire??? Blackstone group, Private equity guys. You watch… They’re going to fluff those numbers, raise some leases, cut some costs, then dump this thing for a nice profit. THEN, that buyer will be left holding the bag. My bet??? 5 years or so from now Sam’s buying it all back for penny’s on the dollar. He’s done it for 50 years. Just plays the same game over and over.
You don’t have to INVENT ways to get rich, DUPLICATING works just as well.
I’m starting in REI due to easy point of entry. Once I have some capital some will get put into the stock market. I want to have money in a lot of different areas just to keep things diversified and safer for my numbers.
Its definitley not apples and oranges. Whether its real estate, stocks or horse racing its all about choices and exposure to different asset classes. This means both your savings/investment funds as well as your day to day work effort. Working for GM and investing all of your 401k in GM stock is not a wise choice. Likewise, working in real estate and investing all of your savings in more real estate is not a wise diversification choice. Spread both your time/effort and investment cash into a variety of asset classes to get the best return for the least amount of risk. Its called modern portfolio theory and it does work.
You hit it right on the head. Learn what works and what doesn’t for stock investing NOW. That way when you DO have that cash surplus you’ll have seen the same events occur over and over. Your excess cash will work for you, and THAT is how people get rich. Making their MONEY earn more money.