Stocks or Real Estate-Best path to prosperity?

Quote from Zr1Trader:

Lets say one has 250k to invest and is 25. What path would you take to make 25 Million by age 50?

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?

In order to achieve this one would need about 20% growth compounded annually

Thoughts?
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While ambitious goals are admirable in one's youth, there is something to be said as well for realistic goals. You could, if you invest well, with safety of principle in mind, reasonably expect to have between two and three million in 25 years. But even that is by no means a sure thing.

You can average twenty percent a year trading, but do you know how to trade? It's easy, but not easy for most people to learn, and most, if the statistics are to be believed, just can't do it.

Real estate can return 20% a year over the long haul, if you are very lucky, but 8 to 12% overall is more realistic. But realize that owning investment real estate (a subject I know something about) can be an annoying bother, unless you hire others to manage your property, and then your yield is reduced. You might get lucky though and buy in a slump, and sell twenty-five years from now in the next bubble. Do you want to depend on luck?

Then too, if you plan to go into real estate investing, consider where will you buy your property? You may have identified a location that you think is ripe for appreciation, but do you live nearby? I don't recommend trying to mange property remotely. And the tax treatment is more favorable for active participation rather than passive. Are you prepared to move in order to be near your investment property?

These are things that must be considered. There is no free lunch; there is no getting rich quickly without high risk.
 
I've never liked the liquidity and price transparency proposition of real estate versus liquid stocks/futures.

I think if you were to approach it like a (potentially leveraged) bond acquisition with questionable liquidity, that might be your best bet in terms of how to view it from a trader/investor perspective. I think to be really good you need to have a good army of financiers (at least initially), tax people, property management people, and of course customers.

Then it just becomes a cash flow + interest rate + leverage/risk game.

My general feeling is it is best left to when you have serious money such that liquid equity and futures markets are not able to handle your size, and so you must go looking for expensive illiquid things to park $ into. I'm not there personally so this is my wild-ass guess.

Of course there are always ETFs and REITs should you be looking for diversification instead of just pure monster leverage which can be achieved in RE with the right financiers and the right property portfolio...
 
What would be the most real estate you could buy with 250k?
Suppose @10% down you could get 2.5m worth of property.

The key would be how soon you could get your 250k out of your 2.5m property to use for a down payment on another 2.5m of real estate.

If your down payment is locked in and you're unable to get the equity out, you'd be stuck for some time, but if you could get it out you could build quite a portfolio of real estate.

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Imo, though. Real estate investments have two outcomes. You buy and rent for cash flow or buy and rent for equity. There doesn't seem to be an in between.

If you're renting for cash flow, appreciation is at risk ( deteriorating neighborhoods). If you're renting places to build equity, maintenance, upgrades are eating the rents.
 
Quote from Magic8:

Usual pattern is to make it in real estate, then lose it all in the stock market. Net out zero, in the end.
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I'd go further to say that it's common pattern to make money from wages/business, etc. and lose it in the stock market.

Most people think that when they purchase a stock that it's no big deal they can sell it whenever and get their money back. Instead, the stock starts going down and they average at lower and lower price hoping for it to rise a little bit back to their break even. Alas, the company goes bankrupt and the investment is lost.

At least with real estate there is an inflationary bias to always rise in the long term. Stocks with consistent earnings power have that too, but you won't make a lot of money buying and holding Coca Cola unless you started with a lot.
 
I'd go with real estate. I own a condo I've been renting out and also recently (6 months ago) split the purchase of a townhouse with my brother. Paid $145,000 for the condo and $160000 for the townhouse. Put 20% down on both properties (10% on townhouse, brother put in other 10%).

The condo has been vacant for 2 weeks in the last 3 years and townhouse got rented out within 3 weeks of closing. Both properties have had multiple rental offers. LOT of people looking to rent so when the condo was available for rent in March, we were able to collect 10% more per month than what the previous tenant was paying.

Basically the way I see it, prices can keep falling and it doesn't matter because if people aren't buying houses then they are renting which means I'll collect more rent. At some point I think prices will stabilize when people realize that paying a ton of rent out of fear doesn't make sense.....

Anyway, my brother and I are viewing the real estate properties as something we are going to hold into retirement and let the renters pay all the remaining mortgage after our downpayments unless the real estate catches another ridiculous price increase.

So my trading isn't doing nearly as well as the real estate investments!!...but thats just my experience so far.
 
I think the person who posted earlier about real-estate being illiquid and thus hard to "over-trade" is quite insightful.

Perhaps the elitist phrase du jour should be:

Those who can't trade, invest in real estate. Those who can't invest in real estate, mow lawns.

All kidding aside I think investing for cash flow in a place with the right demographics is a reasonable proposition.

For the developers, flippers, and highly leveraged gamblers, it is the lotto just like "I turned $1,000 to $1,000,000 buying DOTM call options" people.
 
Quote from huh:

I'd go with real estate. I own a condo I've been renting out and also recently (6 months ago) split the purchase of a townhouse with my brother. Paid $145,000 for the condo and $160000 for the townhouse. Put 20% down on both properties (10% on townhouse, brother put in other 10%).

The condo has been vacant for 2 weeks in the last 3 years and townhouse got rented out within 3 weeks of closing. Both properties have had multiple rental offers. LOT of people looking to rent so when the condo was available for rent in March, we were able to collect 10% more per month than what the previous tenant was paying.

Basically the way I see it, prices can keep falling and it doesn't matter because if people aren't buying houses then they are renting which means I'll collect more rent. At some point I think prices will stabilize when people realize that paying a ton of rent out of fear doesn't make sense.....

Anyway, my brother and I are viewing the real estate properties as something we are going to hold into retirement and let the renters pay all the remaining mortgage after our downpayments unless the real estate catches another ridiculous price increase.

So my trading isn't doing nearly as well as the real estate investments!!...but thats just my experience so far.
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What kind of rental yield per annum?
 
You could make 25% a year, WITHOUT any need for leverage in investing/speculating/trading liquid assets like stocks, commodities etc. You can reach your goals without undue risk.

With property, the illiquidity factor is there, there are hassles with maintenance and tenants etc. Also, when people calculate returns on property they seem to leave out interest costs and maintenance costs, which can be hefty.
 
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