re: Stock market vs real estate

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Stocks, you just sit and wait and hope. In Real Estate, you can improve the property to increase rents.

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As with most things in life it's highly dependent on what you pay for the asset for a margin of safety. One can't control future property taxes, insurance costs, maintenance, mortgage rates which will affect buyer's capacity to borrow and can influence selling values, will the government continue to subsidize RE and mortgages, etc, nor can one prevent an area from going into short to long term decline. Contrary to what some working in RE want to believe, RE is a very illiquid asset, especially if one misjudged the purchase price and can't afford to take a loss. The current RE tax benefits can be good, but who knows what that will look like down the road, you have depreciation recapture when you sell, and the estimated holding period going into an investment may be affected by outliers beyond your control.

I know a couple that live a few miles from us that are Darden School grads and are quite bright, but they are ~ $180k down on what was a $425k house in a good subdivision. Anyone can make a mistake and when it is RE the exit alternatives aren't always easy.

I have done well with the commercial and residential RE investments we own as well as the stock market, neither are always easy to manage. Leverage is a dual edged sword, liquidity can be a great thing if one doesn't like a lot of added stress in one's life. It is a lot easier to manage gains and tax losses in a brokerage account for future income tax offsets vs paying a mortgage on property that may not appreciate.

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Real Estate is local, over the next 5 years their will be places where real estate out performs the market and other places where it will not.

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Agreed. As with anything, location matters in real estate. Buying a fixer upper in a piss poor area because you 'expect' it to appreciate is no better than investing in penny stocks.

Just because it is an investment property, it doesn't have to be 'cheap'.

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That depends. If you know another investor, give them a great deal and you can bail quickly.

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yep or try to sell at market or maybe even sell back to a wholesaler, you may eat some of your equity in it and not get the exact same you paid but hey, at least you are getting out with no cash out of your pocket WORST CASE SCENARIO and IF you have not held it long and not had much principle paydown yet.

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REITs are a good alternative.

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i use those as well

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But hopefully no one here is proposing a general investor be 100% stocks or 100% real estate.

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no, of course not, however RE can give you:

passive income/cashflow

equity capture-if bought correctly

market appreciation

principle paydown- from tenants

tax advantages like a 1031, depreciation deduction, etc.