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Stocks or Real Estate-Best path to prosperity?
- Thread starter Zr1Trader
- Start date
I have often thought that the reason real estate does well for most folks is that they can't day trade it. Because of the cone of uncertainty, emotions, and the greater likelihood of making money in a rising market given enough holding time (buy and hold) most of the real estate folks likely make money in spite of themselves.
People usually do more research in a house, that will be there tomorrow (barring accidents) that the stock of the month club, which may turn out to be gone tomorrow.
People usually do more research in a house, that will be there tomorrow (barring accidents) that the stock of the month club, which may turn out to be gone tomorrow.
Quote from Zr1Trader:
Assuming I would invest in futures only using 4x leverage.
With 250k x4 = 1 million to use to invest
Say I buy the /ES now at 1286.
1 million dollars/ $64300 per contract = 15 contracts
Maintenance margin overnight is $4000 per contract.
250k /15 contracts =$16666 so I would never get a margin call.
1 million x 8% average annually = $80,000 a year.
Now if I used all of my money and invested it in real estate I know you can make 20-40% per year back on your initial capital depending on the situation and deal. This is after tax benefits and costs.
Providing you have renters and using a figure of 5% annual growth of property value(avg over past 50yrs)
So 250k X20% = $50,000 a year. or best case 250k x 40% =100k
Both avenues seem fairly equal except one requires a lot less work.
Is my math logic correct here?
Edit.....
I would be wiped out on a 25% correction in the futures. So If I wanted to be safer I would only use 2x leverage and make an average of 40k a year. assuming 8% annually. Then it would take a 50% move against me to kill me. Which , those do happen once in a great while!
Moral of the story, I think one can more safely leverage their money in real estate with the premise that you have renters paying for your mortgage. If rents had come down in price then that could be a major issue though. No risk no reward!
Quote from Zr1Trader:
Edit.....
I would be wiped out on a 25% correction in the futures. So If I wanted to be safer I would only use 2x leverage and make an average of 40k a year. assuming 8% annually. Then it would take a 50% move against me to kill me. Which , those do happen once in a great while!
Moral of the story, I think one can more safely leverage their money in real estate with the premise that you have renters paying for your mortgage. If rents had come down in price then that could be a major issue though. No risk no reward!
25% correction, bubble ben bernanke wont let that happen, they will close the markets down before that occurs, so dont worry, 25% corrections come once like every 18 years, no need to worry now, the next isn't coming for quite sometime!
When purchased at a low/reasonable price, real estate in the right location is the slower, but surer, steadier path to building wealth for most people.
The securities/derivatives markets are much, much more difficult for the average person.
The securities/derivatives markets are much, much more difficult for the average person.
Quote from Zr1Trader:
Invest in real estate, primarily buying and renting out condo's, apartment complexes and/or homes. Occasionally fixing and flipping when market conditions are right.
Invest in stocks, bonds, currencies , and/or futures. Having the majority in long term holdings and having a smaller portion for trading activities when the market conditions are right?
Both. 25 years is a long time. First, do nothing. When the bargains present themselves, buy.
I believe Sir John Templeton went by Rothschild's adage that "the best time to buy is when there is blood in the streets."
Greece should present the next opportunity.
Residential real estate will continue to decline for some time. The average American is feeling the pinch that our Grandparents likely felt during the Great Depression. Only worse, as today the average American met something called leverage, and unlike our Grandparents, embraced it... They're mostly cash-strapped, and credit is tighter than I've ever seen it. The average American doesn't have the cash to put down, and banks are scared to lend.
For those with cash in hand, there are already bargains out there for those willing to hold. If one is looking for a bottom, who knows when that will be. Imo, we are in a Depression, and it looks to continue for some time. (Sure, the markets have trended up since spring of 09. The markets trended up in the early 30's too despite the Depression. Imo we're repeating history, but only worse this time...)
For now, if I had cash reserves or investment money set aside to purchase another residence, and found a great deal, I'd think strongly about buying despite the contunied price downtrend. The property in FL I mentioned above that was 600k went for close to 150k, and was about 1/4 mile from the beach. (Gulf side) I was shocked by how nice the place was, AND what banks are taking for them to clear their books.:eek:
For those with cash in hand, there are already bargains out there for those willing to hold. If one is looking for a bottom, who knows when that will be. Imo, we are in a Depression, and it looks to continue for some time. (Sure, the markets have trended up since spring of 09. The markets trended up in the early 30's too despite the Depression. Imo we're repeating history, but only worse this time...)
For now, if I had cash reserves or investment money set aside to purchase another residence, and found a great deal, I'd think strongly about buying despite the contunied price downtrend. The property in FL I mentioned above that was 600k went for close to 150k, and was about 1/4 mile from the beach. (Gulf side) I was shocked by how nice the place was, AND what banks are taking for them to clear their books.:eek:
Quote from Zr1Trader:
Another thing, if you own enough properties, you can actually owe ZERO income tax and write off all of your spouses income tax .
The depreciation deductible is a HUGE tax advantage,
Example: Doug purchase a piece of rental property for $300,000.
The tax assessor for the county assessed the value of the land to
be $100,000 and the house to be $200,000. The recovery period for
rental property is 27.5 years so Doug would divide the $200,000 by
27.5 resulting in $7272.73.
Also you can use depreciation deductible on all appliances in the building.
One should not forget however that much or all of the depreciation you took may be recaptured by Uncle Sam if you sell the property, depending on how long you have held it.