Now do the numbers if you bought “Blue Chip” dividend companies like GE VZ T GM FNMA AIG etc 25 years ago.
Would have been better off buying a crack shack in Compton
Would have been better off buying a crack shack in Compton
Dividends with high growth rate versus buying a house
- Thread starter wxytrader
- Start date
Rental company 8% of rent so no headaches. No vacancy. Taxes $1300. Rent for for a total house in the area I'm referring is minimum 2k. The real difference is the house will outperform inflation by about 5% so the house will out perform the dividend scenario every time. Basically you have it right...if you are older and don't have time to do real estate then maybe tossing it in a dividend is a way to go...its kind of like throwing in the towel with investing, just handing money over to a company for a pittance in return. I get that people are after the income, but how many times are they down more in the stock than they are up in dividends anyway? You end up getting trapped...then the dividend can get reduced...
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Like Dave ramsey says 'leaders are readers;
IBD was against buying GE, so even if one bought single stocks , no thanks on GE.
DOW/DIA or UDOW managers may have done that/ but they positioned sized it so small right/ if they did LOL.....................................
As one who has done both RE and divvy investing for a long time, your premise is a bit askew.
At the start you invest 5K in each, with dividends you are now theoretically done. With RE you have just begun and I hope you have additional capital to smooth over the bumps. Bumps like a furnace needed, tenant skips out owing you money and the place needs a couple grand in repairs. If you don't have that additional capital, YOU WILL FAIL. And then sell it to me for a song just to be done with it.
What worked for me was buying cheap properties with minimal chance of appreciation but threw off plenty of cash flow. Use the cash flow to fund divvy purchases. After 8 years or so the properties throw off enough to return my purchase price (now it's a free money pump) and I don't care if the value went up a nickel or not. Much less stress buying if you're not worried about future value.
I sold off one property this past summer and invested a portion of the proceeds in TSLY, the rest in CD's. My return exceeds that of the rental and my phone NEVER rings.
Lots of ways to play it, good luck.
At the start you invest 5K in each, with dividends you are now theoretically done. With RE you have just begun and I hope you have additional capital to smooth over the bumps. Bumps like a furnace needed, tenant skips out owing you money and the place needs a couple grand in repairs. If you don't have that additional capital, YOU WILL FAIL. And then sell it to me for a song just to be done with it.
What worked for me was buying cheap properties with minimal chance of appreciation but threw off plenty of cash flow. Use the cash flow to fund divvy purchases. After 8 years or so the properties throw off enough to return my purchase price (now it's a free money pump) and I don't care if the value went up a nickel or not. Much less stress buying if you're not worried about future value.
I sold off one property this past summer and invested a portion of the proceeds in TSLY, the rest in CD's. My return exceeds that of the rental and my phone NEVER rings.
Lots of ways to play it, good luck.
Where are you buying where there is no capital appreciation? Capital gains is the only reason to get into real estate...the rent barely offsets the costs unless you have multiple rentals...still the money in real estate is made in capital gains not rent...I think the numbers are around 15-20% roi per year in capital gains. I guess my numbers were too conservative...houses out perform inflation by 10-15%. That's probably the difference. If you take away the capital gains then dividends are a no-brainer.
Is that right? Or is inflation baked into the prices? I mean if I am getting a certain price for a house then wouldn't that price include the current inflationary environment? So deducting the inflation rate from the ROI wouldn't be accurate.
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Tough to rent out a beat up house and it costs money to tear down
Small town, flyover country. The do have a very small amount of appreciation, very small.
I'm not the only one doing it. I know some guys with 300+ doors, We all must not know what we're doing
These were picked from a top 10 list for dividend stocks randomly on google.
Annualized dividend yield since 2011:
I have adjusted the yields to allow for inflation in the brackets. So clearly you must select dividend growth stocks such as MO to stave off inflation in any meaningful way...and none of them come close to roi of real estate.
I got this quote from quora or reddit, but its what I was trying to say earlier about real estate returns having inflation baked into the returns, so no need to adjust for it, but it does not seem to hold true for the stocks above, or blue chip stocks in general.
"Generally, long-term, yes. Very simply, companies provide goods and services for money. Inflation causes the price of goods and services to rise, all things equal, which translates to a corresponding increase in company revenues, which in turn translates to “inflation-adjusted” profits.
Again, overly simplistic explanation, and the relationship is more reliable over long-term periods."
https://fastercapital.com/topics/unveiling-the-hidden-effects-of-inflation-on-dividend-returns.html
Annualized dividend yield since 2011:
- xom 3.8% (1.4%)
- vz 6.70% (4.3%)
- pep 3.1% (0.7%)
- MO 9.7% (7.3%)
- wfc 2.90% (0.5%)
- cmcsa 2.70% (0.3%)
- bmy 4.08% (1.68%)
- Gild 3.70% (1.3%)
- MDT 3.20% (0.8%)
- nee 3.30% (.09%)
I have adjusted the yields to allow for inflation in the brackets. So clearly you must select dividend growth stocks such as MO to stave off inflation in any meaningful way...and none of them come close to roi of real estate.
I got this quote from quora or reddit, but its what I was trying to say earlier about real estate returns having inflation baked into the returns, so no need to adjust for it, but it does not seem to hold true for the stocks above, or blue chip stocks in general.
"Generally, long-term, yes. Very simply, companies provide goods and services for money. Inflation causes the price of goods and services to rise, all things equal, which translates to a corresponding increase in company revenues, which in turn translates to “inflation-adjusted” profits.
Again, overly simplistic explanation, and the relationship is more reliable over long-term periods."
https://fastercapital.com/topics/unveiling-the-hidden-effects-of-inflation-on-dividend-returns.html
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Closer to the city rents typically are more about location. The problem you might run into is property tax hikes which the rent will not cover. If you go a little ways out of the city you can get a decent older house, and cheaper land and taxes...rent it out and basically set it and forget it.
Well that's what I said, unless you buy an apartment building, or have multiple houses, rent does not generate any meaning full roi compared to the capital gains. For example, those beat up old houses used to be 150k back in the 90's, now they are 30 years more deteriorated, but are worth over 2M. Anyway, this was to compare buying a house versus investing in dividends.
2M in Capital gains after taxes: 1.56M
Average rent over 30 years after tax: 224K
Total ROI on land: 900% increase
Total ROI on rent: 140% increase
Total taxes: 664K
The real shocker here is the amount of tax...at least in Canada we have universal heathcare.
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Have we forgotten 2008 already?
Please don't try and be a landlord, for your own good. It takes a special breed to be able to weather that business and I'm afraid you might learn a painful and expensive lesson.