Another reason why real estate > stock market - Page 2 - TigerDroppings.com

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LSURussian
LSU Fan
Baton Rouge
Member since Feb 2005
80644 posts

re: Another reason why real estate > stock market


quote:

Another reason why real estate > stock market
From the census. 2008-2012.

Huntsville: $48,632
Alabama: $43,160

Huntsville

Baton Rouge:$38,974
Louisiana: $44,673

Baton Rouge

That's why I asked for the link. The per capita income for Baton Rouge (city) is skewed by the population of students at LSU and by the number of government dependent (welfare) recipients in the inner city. The per capita income of the SMSA for the Baton Rouge area is significantly higher than for Baton Rouge itself.



But, that's not important for this thread's purpose....

My original post is valid. Investing in real estate requires maintenance time and costs, along with the occasional aggravation of dealing with a tenant for paying late or not paying at all.

I know. I've done it.

Investing in stocks do not have those costs and aggravations.

If someone has the time and inclination to devote to investing in rental real estate, it SHOULD have a higher return because of the associated time requirements to manage it.

Comparing the two classes of investments based solely on return is comparing apples to oranges.






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Janky
LSU Fan
Team Primo
Member since Jun 2011
7687 posts

re: Another reason why real estate > stock market


Do you buy these in your name, a LLC or inside an IRA?


This post was edited on 1/5 at 3:34 pm


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I Love Bama
Alabama Fan
Alabama
Member since Nov 2007
32075 posts

re: Another reason why real estate > stock market


I focus on lower middle class homes. I'll pay cash for this deal but most of mine are financed.

I keep $5,000 in replacement reserves per unit. This is plenty to take care of 6 months of more of vacancy, new water heater, carpet, etc.






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bamafan425
Mississippi St. Fan
The Golf Board Superintendent
Member since Jan 2009
22669 posts

re: Another reason why real estate > stock market


Just convinced my parents to rent out our condo in Tuscaloosa to one of my buddies who graduated and is working right next to our condo.

He gets a fully furnished condo. He agreed to move out of the master bedroom during game weekends for my parents. And we get to make some money back on the condo that we pretty much only use for football.






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I Love Bama
Alabama Fan
Alabama
Member since Nov 2007
32075 posts

re: Another reason why real estate > stock market


quote:

If someone has the time and inclination to devote to investing in rental real estate, it SHOULD have a higher return because of the associated time requirements to manage it.

Comparing the two classes of investments based solely on return is comparing apples to oranges.


I agree. However, deducting for my time and maintenance costs, my net worth is MUCH more than it would be if I had just put this money in a 401K.

Everyone should be diversified. I'll be the first to admit that I plan putting more money in the stock market this year just because of how top heavy I am right now.






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I Love Bama
Alabama Fan
Alabama
Member since Nov 2007
32075 posts

re: Another reason why real estate > stock market


quote:

Do you buy these in your name, a LLC or inside an IRA?


One LLC with a big umbrella policy. I've thought about the self directed IRA but that is playing with fire.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
29858 posts

re: Another reason why real estate > stock market


quote:

middle class neighborhood. All white.


I pulled up real estate listings and found a property on Brookline that sold in late Oct. for just under $29K, since you haven't closed I'm guessing you aren't far off then. The property doesn't look like the hood, it just looks old, built in the early 60's. So I'm guessing lower middle class.

It's worth pointing out though that it doesn't take experience to do okay in stocks, just buy a target retirement fund and be done with it. It's a more efficient market than local real estate. Yes, it's certainly possible to do better in real estate for that reason although you do need more knowledge and experience and hats off to you for finding a property like that. It's an apples and oranges comparison.

You also need more capital in most places, although if you can buy a freaking house for $20K maybe not all that much. Quite seriously, a parking space in a nice area here in DC costs about that much.






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Brick67
Georgia Fan
Barksdale AFB, LA
Member since Oct 2012
328 posts

re: Another reason why real estate > stock market


I've got a good friend who did this in the Athens, GA area and branched out from there and he has made a fortune. Did low income housing as well pulling -6 HUD money from the gov't. Worked his @$$ off for awhile and still works hard now but is now a broker and has people do the property maintenance for him. I might look into this when I retire from active duty in 2016.





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Janky
LSU Fan
Team Primo
Member since Jun 2011
7687 posts

re: Another reason why real estate > stock market


quote:

. I've thought about the self directed IRA but that is playing with fire.


Why do you say that? I am truly ignorant on real estate so this is a cool topic for me. Thanks.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
29858 posts

re: Another reason why real estate > stock market


quote:

Comparing the two classes of investments based solely on return is comparing apples to oranges.


I swear I did just see this after my post above.






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LSURussian
LSU Fan
Baton Rouge
Member since Feb 2005
80644 posts

re: Another reason why real estate > stock market


quote:

However, deducting for my time and maintenance costs, my net worth is MUCH more than it would be if I had just put this money in a 401K.
I suppose so. Of course, that would depend heavily on what stocks you bought in your 401K.

quote:

how top heavy I am right now.
Always remember that every single banking crisis in the U.S. in the past 100 years was associated with a real estate collapse. There is no asset class more illiquid than real estate at a time when the owner needs the liquidity the most.






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I Love Bama
Alabama Fan
Alabama
Member since Nov 2007
32075 posts

re: Another reason why real estate > stock market


quote:

Why do you say that?


What I have read on it...

You can buy RE in your IRA (even roth) but you can't do ANYTHING with regards to maintenance or management.They can wipe out your account if you are over there mowing the grass one day.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
29858 posts

re: Another reason why real estate > stock market


quote:

Point I am trying to make is, anyone can make easy money in real estate


So back to your original post. If you live in an area where you can get houses for 30-40K and rent to semi-decent tenants, you're probably correct. Thing is, that isn't true for everyone.

For example, I live in the DC metro area. There is nothing rentable here that doesn't cost $300K to buy unless it is in the hood. That kind of money gets ten houses in Huntsville, apparently.

This means you don't have to worry as much about a tenant being habitually late. If that happens to a $300K property in DC it's the equivalent of having every single one of your Huntsville tenants not paying the bills at the same time.






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I Love Bama
Alabama Fan
Alabama
Member since Nov 2007
32075 posts

re: Another reason why real estate > stock market


quote:

This means you don't have to worry as much about a tenant being habitually late. If that happens to a $300K property in DC it's the equivalent of having every single one of your Huntsville tenants not paying the bills at the same time.


a very fair point. Most in this sub are in the south where housing prices are VERY cheap.

Could you go 50 miles out and find a sub $100,000 rental? Maybe a quadplex in DC where two of your tenants pay the mortgage? I bet you could....






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Janky
LSU Fan
Team Primo
Member since Jun 2011
7687 posts

re: Another reason why real estate > stock market


So you have to pay someone to do maintenance and pay them out of the IRA?





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I Love Bama
Alabama Fan
Alabama
Member since Nov 2007
32075 posts

re: Another reason why real estate > stock market


I'm not 100% sure, but I am pretty sure that is correct. You can't fund anything out of pocket. The IRA has to take in all the revenue and put out all of the expenses.

I'd be too scared to try it.



This post was edited on 1/5 at 4:04 pm


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Janky
LSU Fan
Team Primo
Member since Jun 2011
7687 posts

re: Another reason why real estate > stock market


Interesting. Thanks for the info and patience.





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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
29858 posts

re: Another reason why real estate > stock market


quote:

Could you go 50 miles out and find a sub $100,000 rental?


Believe it or not, no. Even foreclosures in 2009 were going for $150 and that was in bad neighborhoods. I should add that the $300K example I picked will get you a 600 s.f. condo, not a house. A house comparable to what you'd see on Brookline Ave. will typically go for $500K and that's really just purely property value and will be on a smaller lot. A lot similar to Brookline size will be closer to $750 and a WW2-era house will be on it, it isn't that unusual here for the new owner to raze the property and build to suit. There are few large yards here, the land is just too valuable.

50 miles out you can get a house for about $300K. Probably an alert investor can do better, but again the point is that in the stock market I can just place an order online for an index fund.



This post was edited on 1/5 at 4:14 pm


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Smalls
LSU Fan
The South
Member since Jul 2009
3233 posts
 Online 

re: Another reason why real estate > stock market


I've been contemplating getting into this for awhile now. I'm intrigued. There seems to be tremendous value in smaller cities across the South.




This post was edited on 1/5 at 4:48 pm


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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
29858 posts

re: Another reason why real estate > stock market


quote:

Maybe a quadplex in DC where two of your tenants pay the mortgage?


I know a guy in Arlington who bought a single family rambler-style property that is probably worth around 700-800K and rents out two rooms. We don't really have duplex/quadplex housing here that I know of.






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