Why invest in real estate??

General Real Estate Investing
101
Like the guy who said, I invested using nothing but interest only loans...you know nothing about me.
weren't you the one who said PITI was a thing of the past?
I wish you'd quit humiliating yourself & highjacking threads. Wouldn't your time be better served abusing Agents in Utah?...one of the few states where homes in most areas are actually depreciating.
in 2004 utah went from 49th in the nation in terms of appreciation to 35th. in the first 6 months of this year most places have appreciated. since you obviously haven't done any research [possibly ever], here's link for you. http://deseretnews.com/dn/view/0,1249,600138337,00.html

you’re coming to CA to be an agent AFTER the party’s over.thats why i say you’re just an agent and not an investor. infact, now i doubt if you’re even any good as an agent. otherwise why would you flee your hometown to come here?

102

To compare the stock market and real estate is as good as to compare

     an apple to a orange!

     the space shuttle to a bike!

     A t-bone to a penut butter sandwich! 

    A rolls royce to a pinto!

    A trip to hawaii to a trip to prison!

    And last but not least 

   900 numbers to a free satilite dish!
103

hasn’t anyone mentioned the tax advantages of Real Estate?

you can have a cashflowing property and still claim losses on your personal taxes[upto 25k]

you can rollover your profits indefinitely.

if you have numerous properties, you can make it a biz and get biz deductions

and you can travel and have uncle sam subsidize it [but talk to your CPA on this one!]

plus making money in RE is much easier than the stock market. and the gains are bigger too!

104

I really can’t stand some of these negative bashing posts. I sit here and read these forums a lot, and see people like infowell offering their opinions to those who may request them, as well as seeing a lot of valuable information posted. Same with others in these forums. For me personally, infowell, tedjr, reo, and a few others provide a valuable service to other investors, especially newer ones like myself. I personally thank all of you who take time from your busy days to help others.

This childish name calling and stuff like that is ridiculous, and reeks of petty jealousy and immmaturity. Maybe some of you should act like adults. This nonsense takes away from some very intelligent posts, especially ones with valuable facts to back up someones opinions. Half of the responses don’t offer any facts to dispute; just a “you don’t know anything” blah blah blah. There is just no reason nor need for this kind of behavior.

Sorry, but this kind of stuff just sucks.

Have a great day all, regards, Tony

105

Good post, Bobo!

Keith

106

Thank you Bobo,

For the record…I do invest. I also work with investors & have for many, many years (before obtaining my Broker’s License in fact). I post here because, I like to share my insights & I’ve received a great deal of free information on this site in return.

For the record…I’ve no intention of picking up stakes & leaving the area I now call home (though it’s not my hometown). We have MANY connections in So.Cal & clientele is not a problem (in fact, we have clients moving from CA to this area…all are referrals). Moreover, I may not be the one to get the license in CA…it maybe my wife…I may get my license in NV and/or HI (we haven’t decided yet).

For the record…it’s my opinion…as Investors there’s many much more worthwhile areas than Utah to invest our hard earned dollars–areas which offer the potential of MUCH higher returns. Many metropolitan areas in UT have depreciated aprx. 4% in the past twelve months. I HAVE done the research (I don’t rely on newspapers…I have access to a large database) & although homes are relatively inexpensive–I don’t see the state as a break out market (a couple vacation spots aside).

For the record…I’m NOT “just a salesperson.”

Why invest in real estate? From a slightly different perspective (Comparative Advantage);

Advantages of investing in real estate if you are a “Real Estate Professional”: If you are a “real estate professional” who spends at least 750 hours a year (“materially participates”) managing your investment properties, you are afforded nearly unlimited income tax-deductions from this activity.

“Real Estate Professionals” are: Full-time real estate brokers, real estate sales agents, leasing agents, property managers, builders, and contractors.
Real estate attorneys and mortgage brokers DO NOT qualify. Unless, they spend more than 50% of their working hours investing in real estate. Investing in real estate includes buying, managing, and selling real estate.

“Real Estate Professionals” can keep more of what they earn: If you invest in real estate, but do not qualify as a “real estate professional,” and your modified adjusted gross income is less than $100,000 annually–you can write off up to $25,000 of passive loss against active income. Moreover, if NON-“Real Estate Professional’s” annual modified adjusted income exceeds $100,000, the $25,000 loss deduction is gradually eliminated. At the $150,000 modified adjusted income level, the allowable tax loss deduction is eliminated entirely. However, there is NO LIMIT for “Real Estate Professionals” writing off passive loss against active income.

Expenses…everything from Windex to Pick-Em-Up-Trucks. Personal property used to maintain your investment property, such as appliances, is depreciated over shorter periods, typically five to 10 years. Even automobiles and trucks used in the investment operation can be depreciated over their useful lives. Part of the newer tax law allows a 1st year 100% deduction for up to $100,000 of business equipment purchased (bounce this off your Tax Accountant). Mileage up to 4 cars: You can deduct the interest on auto’s even though you take mileage.

Medical insurance is 100% deductible.

Gifts: IRS says “you’re limited to $25 per yr./per client.” However, Business Promotions for future business–there is no limit (as long as “they’re necessary & reasonable”).

Owning a residence (Tax deductibility): Home Office.

I could go on and on, but I’ll leave something to write about for the future.

-Infowell
MORE THAN “just a salesperson”

107

I agree with BoBo. It is one thing to debate an issue or to offer advice, but it is another when people start saying “look who I am” or claim to know someone.

Fact is, you don’t know. Someone posting here could be very well off or just acting that way. Should not matter as the focus should be on how to do things and info. No one here, IMHO, is King/Queen of anything. There are many ways to do things in this world and those who managed to escape their “box” know this.

As to taxes, consult with a real CPA as to what pertains to your own situation. Pretty simple.

On a lighter note, I saved some money on my car insurance today :smiley:

108

So did “Speed Racer”, evergreen!

Keith

109

Infowell, do homes ever depreciate?

110

“Infowell, do homes ever depreciate?”

Most assuredly!

However, we’ve never seen homes in the U.S. depreciate for long periods…it’s always been brief & then recovery (stagflation for periods in some areas perhaps, but not sustained depreciation).

We’ll have to see something happen to change the supply vs. demand ratio before homes begin depreciating or have prices even start going sideways (which is more of a potential scenario in my opinion–slight depreciation followed by stagflation…followed by recovery).

That change could come in the form of significantly higher interest rates (keep an eye on the 10 yr. bond), but I don’t see interest rates suddenly rising THAT significantly. Or just an overall drop in demand for an area due to affordability.

I think we’re ALREADY starting to see slowing appreciation in SOME of these hot markets due to affordability. However, there’s still a demand for housing & that demand will slosh over to other markets…we’ve seen, and continue to see that in AZ, & NV. Now The Puget Sound is picking up.

I’ve never said, “buy, buy, buy…prices can only go up” as one of my detractor’s has stated. I try to give my viewpoints as to why I think the alarmist term “Housing Bubble” is media hype. I also like to point out those touting a “Housing Bubble” have been carrying on for 5 years now! After 5 years can we really consider them experts?

Another detractor wanted me to make a bet with him that there’d be a crash in the next four years (you can bet on the Internet by the way if you think a “Housing Bubble” is imminent…I’ll try to find the link later). I didn’t take the bet because, I don’t know what the housing market is going to do in four years (no one does…not even Economists…too many variables). Rather than risk making silly predications, or pick up a chant because I heard it on TV, or read it in the newspaper…I prefer to react to markets than predict them (short term predications aside). Besides, five years of previous dire forecast combined with four more years = nine years!!! :-\ Couples get pregnant & raise a child halfway to college in that amount of time. Imagine how much could be made towards that childs college education by ignoring the Doomsday Soothsayers.

I DO listen to those who constantly warn of coming disaster. And what I’m hearing is market mentality…they either don’t understand or choose to ignore market fundamentals.

Don’t worry…be happy!

-Infowell

111

I also like to point out those touting a “Tech Bubble” have been carrying on for 5 years now! After 5 years can we really consider them experts?

You see, all I did was change one word. It is the same story just different investment. The “Experts” were touting a stock market bubble as early as 1995. Some were betting on '98, but it didn’t really burst till mid 2000 and got trounced in 2001. So in order for Real Estate to keep appreciating you have to bet on Hyper-Inflation. That I believe will not happen. Only third world countries have hyper inflation, I hope our country isn’t that bad economically. That is why I believe Deflation is on the horizon. The incredible wealthy benefits from deflation, but would get trounced in inflation. The middleclass would benefit from hyper inflation, but would get trounced in deflation. That is why I am betting on deflation.

But hey what do I know…

Infowell, I asked you that because I was curious to know how much of the kool-aid you have been selling you were drinking yourself. “don’t get high on your own supply” Scarface.

112

Hey guys, don’t forget to stock up on water, food, guns, ammo, and battery-less appliances. Y2K is coming!

Gonna party like its 1999.

:smiley:

113

[i][b]“Hey guys, don’t forget to stock up on water, food, guns, ammo, and battery-less appliances. Y2K is coming!”

“Gonna party like its 1999.”[/b][/i]

Now THAT’S funny!

Ya know Dan…nearly every Bubble Head one listens to–points to NASDAQ as an indicator of things to come in the housing market. That’s their BIG argument…Tech Stocks tanked & so can Housing Prices. I never hear or read them address Market Fundamentals…it’s always market mentality. Somebody on TV or the radio says, “Housing Bubble” & some of the sheep pick up the chant…Buuuuble…Buuuuble…Buuuuble…Baaaa.

My “Kool Aid” has made me, my family & friends wealthier than we ever thought possible because, we can think for ourselves.

Consider sharing your qualifications with readers & coming up with a better debate than the Tech Bubble. Put down whatever paper you’re reading, and read the many articles offered here for free. Change the television station, and get some CD’s offered on this site. Obtain some data sources, learn to digest the numbers, and come back, and thank me in four years.

Note: “The Experts” weren’t touting a Tech Bubble in 95, or even 98…they had on party hats…I remember.

-Infowell

114

I got this in my morning e-mail from one of my business newsletters. This one is from Luke Hudgens.

Hubba bubba, or overhype? The housing market is so hot right now that every Moe Larry and Curly on the street is saying we’re in a bubble. If your grocery bagger tells you something about the stock market, you know it’s time to get out. But when it comes to the current housing situation, should we listen to Moe, or is he just a band wagon fan?
After the tech bubble burst five years ago, everyone and their mother claims they warned us ahead of time that it was about to happen. Unfortunately for investors, the reality is there were actually very few voices crying burst… and we just didn’t want to listen. When you analysts like Mr. X, or Mrs. Y and how they predicted the tech burst, you’re really reading someone who is simply hyping their ability to predict markets. Sure, Mr. X may have mentioned something about stock valuations getting too high, but he was probably doing that for 10 years prior to the crash. Some people make wild predictions and wait years for them to happen… and when the do, you get an “I told you so”. Here’s where Moe comes in.
It has gotten so popular to tell your buddies how you knew the tech bubble was going to pop that if you say you didn’t know you look like a fool. Now the buzz is on real estate. Word is now spreading like wild fire that real estate is going to crash. You hear it from Moe, you hear it from Larry and you hear it from Curly down at the grocery store. But if you listen carefully, you aren’t hearing it from the professionals… and you’re not hearing it from Greenspan who first warned us of “irrational exuberance” during the tech bubble. You’re hearing it so often because people want to have the ability to say “I told you so.”
Now don’t get me wrong, prices for real estate will most certainly moderate in the coming months. But we are not going to see a crash. Real estate is not like stocks. If you sell a house, you’re going to buy another, or move into one that someone else owns (rent). If you sell a stock, you may never buy one or touch one again. We may see prices drop a bit in some areas, we may see prices skyrocket further in others, but we won’t see people abandoning housing to live in tents in the woods. This I guarantee. Greenspan has warned of soft patch areas for real estate, but as a whole the market is strong and may not see a broad slowdown for many months. We’ll find out more today.

At 10am, the National Association of Realtors is scheduled to report on existing home sales for the month of June. Analysts expect to see a slight increase in existing home sales to an annual rate of 7.14 million in June from 7.13 million in the prior month. On Wednesday, we’ll be anticipating the new home sales figures for June. Analysts are expecting a slight decline from the previous month. But don’t go selling you house just yet… unless you’re moving into a tent in the woods.
A quick look at the stock market. In early morning stock futures trading, Dow futures are trading lower by 5 points while NASDAQ 100 futures are off by 0.5. S&P 500 futures are lower by 0.6 with crude trading at $58.27, down 38 cents. Traders will be focusing on earnings releases due before the bell from American Express, Bell South and Texas Instruments. Have a good day trading.

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115

Unlike real estate that has limit to its groth, quality stock can grow expnentially without any limit. A $10,000 investment in stock can worth $10 million in a year. There is company in TSX called Aurelian gold, it went up from 10 cents to 40 dollars in less than 6 months. So someone who was lucky and bought only 100,000 shares at 10 cents (cost base of $10,000) would have atleast $4 million now. You can’t have such return in real estate. To me, real estate is good for diversification and risk mitigation. Do not close your stock options because stock can return unimaginable returns when bought right. All these money managers with billions of $$$ prefers stock because of the liquidity. How many houses would you put out for sell with 1 billion $$. The ease of management and control makes stock KING! I invest in both stock and real estate at 50% and I love that. Aleast with stock, you can cut your losses and run and still keep your credit worthiness! WIth real etate, you have to foreclose in downturn which sucks!!

116

I got one for ya! What about having you tenants pay for your mortgage and give you back the money you put down monthly. If you do this with 10 properties that appreciated to $200,000 each over 10 - 15 yrs and can manage to pay them off by 15 yrs., you can refi at 50% LTV and take out $1M tax free. It’s not considered income because its debt. Debt that your tenants will pay for again and give you monthly cashflow. Try and cash out stocks without paying taxes… Don’t drop the soap! :shocked

117
Unlike real estate that has limit to its groth, quality stock can grow expnentially without any limit. A $10,000 investment in stock can worth $10 million in a year. There is company in TSX called Aurelian gold, it went up from 10 cents to 40 dollars in less than 6 months. So someone who was lucky and bought only 100,000 shares at 10 cents (cost base of $10,000) would have atleast $4 million now.

This is more hype and nonsense than reality. For every person that turns a $10,000 penny stock into $10,000,000, there are hundreds of thousands that will have their $10,000 to to zero.

You can't have such return in real estate

Absolutely false. You can have an INFINITE return with real estate because you don’t have to put down any of your money. I’m closing on a deal tomorrow where I’ll pick up about $250,000 in equity and $25,000 per year in extra spendable income and I will have NONE of my own money in the deal. Try that with stocks and you’ll be very disappointed.

Aleast with stock, you can cut your losses and run and still keep your credit worthiness! WIth real etate, you have to foreclose in downturn which sucks!!

With stock, you can be upside down with margin just as easily as you can with real estate. At least with real estate, your property almost never goes to zero, which is certainly not true with stocks (especially penny stocks).

I own a rental business and I have traded stocks for over 10 years. Both can be good ways to make money, but let’s not make wild claims about stocks that simply aren’t true.

Good Luck,

Mike

118

obaco…
Mike put it correctly…The chances of the average investor hitting a penny stock that pulls a .10 to $50 is close to zero…I can personally tell you many try and lose so much that they often fade away broke in the process…

Don’t get me wrong I like the equity markets as well but real estate imo is just another way to make money but slightly less risky than the equity markets when done correctly…Yes can you make money over the longterm in equities,yes you can hit a grand slam but will you personally or anyone you know…Highly doubtful…What you will see/know/meet is people who took a measured approach to investing in solid companies over an extended period of years and have watched their money grow,there is no disputing that…

Funny thing is everyone here talks stocks so often and they overlook closed end funds…They have great dividends that pay monthly and you can buy them below dollar par…Alot of ways to make money…Put 50k into a closed end fund selling at %15 discount to par with a %11 yield you are getting $460 a month in dividends and the tables turned in your favor that the fund will gain vs lose because of the high discount…

Real Estate to me is just like a closed end fund…It brings me money every month…

119 
 Call me the accidental real estate investor.   Bought my first primary residence with a no money down VA loan in 1999.   Lived in it 3 years, relocated and decided to put a renter in it.  It had appreciated by that point enough to refinance to a fixed 30 year loan.  With my VA eligibility back, I bought my second primary residence and lived in it for 3 years.   Again I relocated and decided to put a renter in the second home.   Without ever planning on it, I own 2 rental properties that generate approx $50 per month positive cash flow after expenses (to include a superb property manager).    With over 100 months combined "renting", I have only had 2 months of no rent coming in.  Used to time to make routine improvements etc.   
 Having both homes in a growing coastal military community helps.  Demand for rental homes is consistantly strong.   Both homes have appreciated generously despite the current situation.  Not sure of my point other than finding my self with substantial equity in 2 houses that pay for themselves (one is waterfront with deep water dock and access to the ocean.  Although not  an "oasis" by any stretch, it is what it is).  My next step is the purchase of another property for the sole purpose of investment.  The equity exists to pull from but the experience / knowledge / courage lacks at this time.  Working on the latter.  
 Bottom line, to answer your question, real estate has provided me a different venue to invest and I literally stumbled upon it.   It offers my family a sense of security just knowing it is there.  My stock market investments do not give me the same feeling.   Good luck.  Appreciate all the great discussions.
120

I think investing in real estate is the best invest in today generation. Few years may be after 5 years real estate investor will be getting very good returns. Infact people who have already invested in properties are making good money now with out any job. And in country like India many people are making their earning this way. On an average a normal realtor makes around $190 after every successful deal.