US stocks vs Real Estate - Posted by George

Posted by Rob FL on May 25, 2000 at 10:05:13:

Good point!

US stocks vs Real Estate - Posted by George

Posted by George on May 24, 2000 at 01:17:20:

A few months ago someone posted something to the effect that US equity investments were superior to real estate. There was general agreement that stocks beat real estate (with some dissent).

Do you all still think that stocks beat real estate?

Re: US stocks vs Real Estate - Posted by chris

Posted by chris on May 25, 2000 at 17:16:56:

I agree with Robert(CA). Also try heading over to the stock folks discussion areas such as http://www.fool.com/ and www.ragingbull.com to “balance” out the responses.

I would be surprised if the comment you referenced was from this board. How did stocks beat Real Estate? Was this comment referring to REITs as compared with the S&P 500 or what? Statistics can be manipulated to come up with the results you want.

-Chris

It’s like asking about Dogs vs. Cats on the Cat Lover’s BB (nt) - Posted by Robert(CA)

Posted by Robert(CA) on May 25, 2000 at 14:55:42:

nt

I believe in asset allocation - Posted by Dave T

Posted by Dave T on May 25, 2000 at 09:20:01:

Practicing asset allocation means spreading your investment capital among different asset classes. For me this means that I am invested in large-cap and small-cap domestic stocks, international stocks, bonds, real estate, and cash.

You do not have to take a stocks VS real estate position that prefers one and excludes the other. In my opinion real estate simply balances a diversified investment portfolio with an income generating asset class.

Re: US stocks vs Real Estate - Posted by Laure

Posted by Laure on May 25, 2000 at 01:03:31:

I like RE because I am in control. If I lose money on a deal, it’s because of ME. If I lose money in the stock market, it’s not because of anything I have done. Stock just went down. I suppose if I were an “intelligent stock investor” I would be doing better in the market. But it just doesn’t interest me.

Laure :slight_smile:

My thoughts - Posted by Tim Jensen

Posted by Tim Jensen on May 24, 2000 at 20:31:24:

George,

I do not think one is better than the other. It just depends on your objective. Now real estate, done properly, will almost always beat the market. However, it involves a more hands-on approach.

What I like about stocks is that you can grow your money without a lot of involvement. You decide what stocks you want then buy it wait and see if your decision was correct.

Overall, I think a mix of Re and stock is good. Like I said above, it depends on how hands-on you want to be.

Tim

My .02 - Posted by Mark (SDCA)

Posted by Mark (SDCA) on May 24, 2000 at 11:44:39:

  1. It is hardly compare to take a snapshot at an instant in time and say. See?? RE does crush stocks…
  2. They both have pluses and minuses. I personally think that REI wins because of a) better leverage and b) better tax advantages… At least from a buy and hold stand point which is where I am coming from…
    RE loses in terms of liquidity but I will take that to get the other 2 benefits.

Mark

Re: US stocks vs Real Estate - Posted by phil fernandez

Posted by phil fernandez on May 24, 2000 at 10:11:35:

I would echo what Rob said below. You can control your investment with real estate. There are to many factors beyond ones control with the stock market.

People need a house to live in. They don’t need stocks. Stocks do not provide shelter. Real estate will always be in demand. It is a necessity.

I like the cashflow from rental real estate. It is real and does not evaporate in a day on the stock market. The cashflow continues to grow as your tenants are paying off your mortgage that you acquired with the use of leverage. You might control a $100,000 piece of rental real estate for nothing down or even $5,000 down. In the stock market you are buying $100,000 worth of stock for $100,000 cash. No leverage.

I could go on and on, but you know where my money goes.

Re: US stocks vs Real Estate - Posted by Rob FL

Posted by Rob FL on May 24, 2000 at 09:57:52:

Stocks and real estate while both being investments are completely different.

The income stocks produce generally comes from appreciation (i.e. capital gains). Real estate has this type of income as well. Stocks generally appreciate faster, but not always. Unfortunately most of mine are down right now. The market has been such a roller coaster lately.

Stocks also can produce cash flow, although you usually have to own a ton of shares to get anything worthwhile. I paid about $4000 for some stock a couple months ago. The price has been pretty flat but it does give me about $20 a month in dividends. Contrast that to real estate. I bought a rental house not too long ago with about $2000 out of pocket and I net roughly $125 a month in cash flow. Real estate can be a very powerful cash cow especially with the use of leverage. Throw in the fact that the rent continues to go up every year or so and the cashflow potential is awesome. Especially with multiple properties and leverage. Stocks don’t provide much cashflow at all.

Stocks generally fluctuate based on a ton of unknowns that the average Joe has no control over. Real estate is much more controllable by the individual from the purchase price, the sales price, the cashflow, fix up costs, etc.

I invest in both stocks and RE and have done fairly well in both. But personally, I like the cashflow every month that RE generates.

Re: US stocks vs Real Estate - Posted by Russ, IL

Posted by Russ, IL on May 24, 2000 at 08:35:04:

I too have thought about the stocks vs. real estate issue and I have decided that it’s draw. In fact, I have come to believe that a well rounded investor is going to have both an active real estate portfolio and and active stock portfolio. Before I continue, let me just say that I do not consider myself an expert on either topic. However, I do own investment property and have a pretty descent stock portfolio.
At one of our recent Chicago Creative Investor Assoc. meetings we had a guest speaker named Myron Gaylord from a company called Invesco. He directly addressed the “stocks vs. real estate” issue in his presentation. I can’t go into all the details here but, one thing he did that was pretty interesting was to go back to 1955 and rate each form of investing in roughly five year increments. Now, I understand that this was generated based on his opinion and investing style but I think he did a good job of illustrating that both avenues can play a role in a persons investment plan when you can understand what is going to work for you during different types of financial markets.
Well thats my 2 cents for the day.
Russ

Now that the question has come up, however… - Posted by soapymac

Posted by soapymac on May 24, 2000 at 08:01:47:

allow me to put in my two cents worth.

This arguement(sp?) boils down to just one thing; control.

Forget “diversification” to spread the risk in equity instruments. When you have DRIPs, STRIPs, CATs, TIGERs, and all the other cute names the equities industry can come up with, what they are looking for, is control…control of your money.

That money is controlled by people you don’t know, who have their OWN interests at heart…not yours. If your interests parallel theirs, then you will make some money. If those interests don’t parallel, guess who is going to lose? You.

Individual investors seem to forget that the whole premise of the stock markets is the law of supply and demand where buyers and sellers can meet. The very nature of the market determines that more often then not there will be a loser on one side of a sale, and a winner on the other. It comes with the peapatch.

Compare that market to the real estate market. The law of supply and demand works here, also…but more often than not, it is a “one-on-one” arrangement. By that very nature alone, each “side” of the bargain has more control…there are no middlemen in the transaction. Facilitators, yes. Middlemen, no.

And how many of these transactions are “win-lose” situations? I have no figures to reference, but from the posts I’ve seen on this board, a majority of transactions are “win-win” or “win-win-win” situations…all because of control.

Like I said, my two cents.

Roy MacLean
"soapymac"

Re: US stocks vs Real Estate - Posted by JD

Posted by JD on May 24, 2000 at 07:18:16:

There most definetly has never been any such general agreement among people on this board. You should search the archives to find out who made such statements, and then ask them.

Re: My .02 - Posted by Rob FL

Posted by Rob FL on May 24, 2000 at 16:10:22:

Also real estate (especially buy and hold) offers monthly cashflow.

Re: US stocks vs Real Estate - Posted by Dave

Posted by Dave on May 24, 2000 at 14:09:21:

Actually, you can still get leverage in the stock market by buying options or by buying stock on margin (50%).

Re: My .02 - Posted by Mark (SDCA)

Posted by Mark (SDCA) on May 25, 2000 at 08:45:15:

So can stocks (quarterly anyway)… with dividends…

Mark

Re: US stocks vs Real Estate - Posted by phil fernandez

Posted by phil fernandez on May 24, 2000 at 16:07:07:

Dave,

I stand corrected on your point. Thanks.