Benefits of Real Estate Investing?

[gwasser]

QUOTE (EdRenkema @ Mar 11 2010, 06:40 PM) Real Estate - I have control over the asset once I own it, I choose when and where to invest based on market fundamentals and simple mathematical calculations.
Paper assets - no control period!

Whats not to understand?

Think thats the way to go? then give er.

Between 2000 and 2005 I was cranking almost $5K every two or three months into mutual funds thinking I was being conservative and relying on a financial `advisor` and not staying much ahead of my principal invested.
Between 2005 and 2009 I tripled my net worth using real estate and learning a system - nobrainer!

What is to understand? - Short term thinking. Real estate goes five, ten, twenty years and so do stocks. Unless you`re a `daytrader`. You just experienced a couple of good years. Just wait until the `unexpected $10,000 roof repair comes in`, how are paying then for groceries?

Investing is not only about making money - it is also about keeping it.

 

[Thomas Beyer]

QUOTE (Millions @ Mar 9 2010, 08:52 PM) ...

As an example in the USA, according to a study I read,in the last 100 years, house prices have not gone up at all (when you factor in inflation )
..
indeed . and using 4 or even 5% as the real inflation, i.e. erosion of money value, I arrive at an ROI of 20% annually on average for real estate: 4% upside over 20% cash down .. assuming no cash-flow (i.e. all cash-flow is reinvested in asset)

or being more conservative: using 3% inflation over 30% down = 10% / year .. EVERY YEAR ON AVERAGE .. brilliant !

The trick is to get enough cash-flow to hold long enough so you can average out .. as some year will be down .. and some up higher than average .. and cash-flowing real estate with a mortgage does not work in every city or every part of the world or every house .. but in some .. so listen to experts or REIN teachings for a while .. and you get an idea where to buy (or where not to) ... how to manage your affairs .. how to find money partners so more than 2 or 3 houses or cash flowing assets can be found ..

 

[GaryMcGowan]

Wrong post.
However interesting thoughts here !

 

[Thomas Beyer]

QUOTE (EdRenkema @ Mar 11 2010, 07:44 PM) Tiny?
I beg to differ, 2 humble condos I bought in Hamilton in 2008 spin off $4 to 500 a month in positive cashflow. ..
enlighten us on details here .. how is that possible ? no mortgage ? or prime -1.2% i.e. 1% variable mortgage amortized over 35 years? What would the cash-flow be with a more normal 4 or 5% mortgage amortized over 25 years ?

 

[Rickson9]

Comparing stocks to mutual funds is like comparing an individual 12 unit apartment to a REIT.

Individuals are only credible at commenting on an asset class if they have experience in that asset class.
My stocks and real estate have done well - enough to become a millionaire (excluding our mortgage-free primary residence of course) by the time my wife and I were 30 and 33 years old respectively. I`m 37 now. I understand the pros and cons of both probably better than most.

I also have friends who are far wealther than I will ever be, who made their fortunes in a number of other ways. There are a million ways to make a million bucks, I have my own opinions of what is easier/harder, but that is beside the point. Ultimately, nobody cares how a person made it and honestly, the subject of what type of investment is easier or who can make more money reminds me of kindergarden children asking who would win a fight between a shark and a bear (obviously the bear would win).

This forum is obviously RE-centric, so I don`t expect to find much knowledge around other asset classes, but then again, I don`t visit here for non-RE information.

 

[Thomas Beyer]

QUOTE (Rickson9 @ Mar 11 2010, 11:38 PM) Comparing stocks to mutual funds is like comparing an individual 12 unit apartment to a REIT....

This forum is obviously RE-centric, so I don`t expect to find much knowledge around other asset classes, but then again, I don`t visit here for non-RE information.
I love your insight on your website .. especially this line: Aren`t options fun? I think that they`re at least as fun as going to the dentist - if not more so.

What is better, assuming you know what you are doing and have the cash: buying individual 12 unit apartment or a REIT ?

What % of your networth is real estate ? and what type of RE ?

 

[MikeMcCrae]

I am certainly not a genius. Maybe I am just lucky but In 1999 I invested $12,000 and bought a rental property, 2 years later I "lent" the venture $50,000 more. 1 year later I got all my money back. Buy adding no more personal money and just using bank money from that point, this one venture has gone from a zero net value to a net value of just under a million dollars. (used to be slightly over) Factor in taxes, inflation and what ever else you would like, to me this is good business. Nothing in and lots of value. What could be better? Is real estate the only answer? Likeky not, but for a non genius like myself I will live with this kind of growth and share it with other partnership groups as well. I am not discouraged because it may not be the absolute BEST investment, but for many it is a good way to secure your future and the risks are low.

 

[bizaro86]

QUOTE (Rickson9 @ Mar 11 2010, 10:38 PM) I also have friends who are far wealther than I will ever be, who made their fortunes in a number of other ways. There are a million ways to make a million bucks, I have my own opinions of what is easier/harder, but that is beside the point. Ultimately, nobody cares how a person made it and honestly, the subject of what type of investment is easier or who can make more money reminds me of kindergarden children asking who would win a fight between a shark and a bear (obviously the bear would win).

Exactly! Ultimately how you make your money, or when, or in what currency even, makes absolutely no difference. It`s whether you do, and what you do with it. No amount of money is worth doing something that makes you unhappy.

I invest in both individual stocks and real estate. I started investing in stocks in October of 2008, and my total account value has grown, even though we`ve taken out the downpayments for 3 condos from that account. I also added a bunch of stock on margin to that account in April 2009, which I`ve since sold and paid off the loan. So my stock purchases have been funding my real estate! The bottom of this recession was probably a "once-a-generation" chance to buy both stocks and real estate, and some of the values I saw I couldn`t pass up. I do not expect future purchases of either stocks or real estate to provide similar value, at least in the near term.

QUOTE (Rickson9 @ Mar 11 2010, 10:38 PM) who would win a fight between a shark and a bear (obviously the bear would win).

I think it depends on where you held the fight. If it was in a forest, the bear would win. If it was in the middle of the ocean, I think the shark would probably be the victor. Which is basically the take home lesson of this thread. Invest in your own element. If you understand real estate, do that. If you`re the type that can spot mispriced stock options, then by all means invest in that. If you have expertise buying underperforming tanning salons and running them for cash flow, do that. But ultimately if you don`t believe you can do it, it`ll never work out.

Michael

 

[housingrental]

"Investing is not only about making money - it is also about keeping it."
I like this. It should be a REIN motto.

QUOTE (gwasser @ Mar 11 2010, 09:37 PM) What is to understand? - Short term thinking. Real estate goes five, ten, twenty years and so do stocks. Unless you`re a `daytrader`. You just experienced a couple of good years. Just wait until the `unexpected $10,000 roof repair comes in`, how are paying then for groceries?

Investing is not only about making money - it is also about keeping it.

 

[EdRenkema]

details: purchsed $135 to 138K, rent $1250 to $1275, mtg 40 yr am at prime -.6, monthly pmt=$315 to $350
condo fees $219 monthly
P. tax $150 monthly
previously HELOC payments of ~$70 monthly but sold a property and paid off LOCs
now JVing on these as easy to justify with that cashflow and good appreciation
It was possible but now prices are up and rents are same.

QUOTE (ThomasBeyer @ Mar 11 2010, 10:22 PM) enlighten us on details here .. how is that possible ? no mortgage ? or prime -1.2% i.e. 1% variable mortgage amortized over 35 years? What would the cash-flow be with a more normal 4 or 5% mortgage amortized over 25 years ?

 

[Thomas Beyer]

QUOTE (EdRenkema @ Mar 12 2010, 01:48 PM) details: purchsed $135 to 138K, rent $1250 to $1275,
..

wow .. where is that ?

 

[gwasser]

QUOTE (ThomasBeyer @ Mar 12 2010, 12:22 AM)
I love your insight on your website .. especially this line: Aren't options fun? I think that they're at least as fun as going to the dentist - if not more so.




He Thomas,



Do I understand it right that you don't like writing call options any more?

 

[Thomas Beyer]

QUOTE (gwasser @ Mar 14 2010, 08:17 PM) He Thomas,

Do I understand it right that you don`t like writing call options any more?
yes I do .. for example on E*Trade .. trades for $1.50 to $1.70 right now and selling the $1.50 call option 2-6 months out is quite premium rich !

but this is just a tiny part of my portfolio .. 80%+ is in apartment buildings ..

 

[gwasser]

QUOTE (ThomasBeyer @ Mar 15 2010, 12:00 PM) yes I do .. for example on E*Trade .. trades for $1.50 to $1.70 right now and selling the $1.50 call option 2-6 months out is quite premium rich !

but this is just a tiny part of my portfolio .. 80%+ is in apartment buildings ..


I play the same game, but with stocks I don`t mind selling. E.g. Royal Bank with a $60 strike price. This is now the third time it hasn`t been called yet. Beats dividends alone big time.

Played the same game with power corp but now I bought shares plus issued the call options. Still hasn`t been taken out either.

It is small patatoes because I don`t do it on my entire position in a particular stock but it adds to the divs. and thus adds cashflow. With a flat market like we had over the last 6 months this is a great little cashflow game on the side.

 

[Thomas Beyer]

QUOTE (gwasser @ Mar 15 2010, 09:16 PM)
...With a flat market like we had over the last 6 months this is a great little cashflow game on the side.
indeed .. and with the expected flattish market going forward with volatility a great way to make money in a flat yet volatile market !!!

 

[Rickson9]

Just an unrelated FYI:

Market returns YTD 2010
S&P/TSX +3.1%
DOW +3.2%
S&P500 +4.8%
NASDAQ +5.7%

Market returns 2010 annualized
S&P/TSX +16.3%
DOW +16.4%
S&P500 +25.6%
NASDAQ +30.6%

The markets have been flatter in the past than the last 6 months. Although it is very early in the year, my YTD is 18% and annualized is around 4x that. This is unsustainable and seems unlikely to continue, but I have never been good at predicting the future.

 

[gwasser]

QUOTE (Rickson9 @ Mar 17 2010, 12:01 PM) Just an unrelated FYI:

Market returns YTD 2010
S&P/TSX +3.1%
DOW +3.2%
S&P500 +4.8%
NASDAQ +5.7%

Market returns 2010 annualized
S&P/TSX +16.3%
DOW +16.4%
S&P500 +25.6%
NASDAQ +30.6%

The markets have been flatter in the past than the last 6 months. Although it is very early in the year, my YTD is 18% and annualized is around 4x that. This is unsustainable and seems unlikely to continue, but I have never been good at predicting the future.

Thanks for the update. I expect this year`s stcok market return between the 10 and 15%, which would be modest for a recovery. I expect another 3 to 5% positive cashflow in terms of dividends and proceeds from options. So who is to complain?

 

[Millions]

QUOTE (gwasser @ Mar 17 2010, 12:57 PM) Thanks for the update. I expect this year`s stcok market return between the 10 and 15%, which would be modest for a recovery. I expect another 3 to 5% positive cashflow in terms of dividends and proceeds from options. So who is to complain?

Does anyone do any stock investing with drips? Dividend reinvestment plans?
I took part in a few such as suncor as long tErm investments but is it as good as I have heard. What are the differce between investing in certain stocks. As in for dividends or other strategies.

 

[gwasser]

QUOTE (Millions @ Mar 18 2010, 01:04 PM) Does anyone do any stock investing with drips? Dividend reinvestment plans?
I took part in a few such as suncor as long tErm investments but is it as good as I have heard. What are the differce between investing in certain stocks. As in for dividends or other strategies.

I do drips on my US stocks since I have little use for converting every little U.S. denominated dividend in to Cdn Dollars.
Some of the advantages are that you don`t pay brokerage commissions.
Sometimes you get a slight discount on the market price.
It is a painless form of purchase price averaging.

If you invest in good (not exessively high) dividend yielding companies that on a regular (or even better anual) basis increase their dividends, some historical studies show that on average you make around 12-15% per year. The dividend increases provide inflation protection that no GIC will provide.

John Drehman claims that investing in dividend paying stocks at average Price Earning ratios or Book Values results in better long term results than in Growth or Momentum Stocks. Jeremy Siegel calculated that over the long term, dividend reinvested stocks perform better with market crashes than without. During the crashes, they paid out dividends (although sometimes temporarily reduced) and allow you, unemotionally buy lots of shares at undervalued market prices. You buy only a few when the market is overpriced. Jeremy went so far as to conclude that if you bought $1000 S&P stocks and their survivor stocks, at the market peak of 1929 and reinvested the dividends every year, including during the Great Depression then by 1954, your investment value would be $4440. If there had been no Great Depression and the market had moved at a steady pace to the same 1954 market level, your investment value would have been $2720.

Here is an another example of how important dividends are: If you bought in February 1987 a share of the Royal Bank at 5 dollars, today coming out of the recent Great Recession, it is valued at just under $60.00. So that is a nearly 12 fold increase in value. Dividend yields of the RY hover typically in the 3 to 5%. So in 1987, RY paid $0.25 per share per year. Today that dividend is: $2.00.

Assuming a gradual increase without crashes (the less favorable scenario according to Siegel), with reinvested dividends your investment value would be: $142.6 where $60 is the appreciation of your original $5 share and a whopping $82 comes from the reinvested dividends.

If, instead you had invested $5 in a growth stock like Nortel in 1987 today`s investment would be zero. Or if you had invested that amount in high flying Bombardier you would today have: $30.00

Does this make you a believer in investing in dividend paying stocks and reinvesting the dividends? It is one of the strategies I have followed. But you know, I diversify and I invest also a lot in oil and gas - only large companies though preferably ones that pay a bit of dividends. I did invest in juniors through a flow through share fund. I fell flat on my face.

Rather than investing and reinvesting in dividend paying stocks, you can also invest in exchange traded funds (ETFs) that mimick the TSE300 or TSE60 and reinvest dividends that way. This is investing for dummies and you probably do better OVER THE LONG TERM than investing in a mutual fund.

Hope this helps.