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Stocks vs Real Estate to generate wealth and passive income
Posted on 9/16/18 at 4:42 pm
Posted on 9/16/18 at 4:42 pm
So I did some searches. I didn't find an answer but then again a lot of this is dependent on the person right?
have 50k in stocks, currently about 30k in southern company and the rest is mixed across high income funds (DHF PHK PHT etc).....
I have 20k liquid in an account. I am torn as to whether I should liquidate my stocks and start going hot and heavy into rental properties or if I should add the 20k to the 50k that is already working for me in some fashion. Right now the stocks are earning me like 300 a month in income (when you spread out the SO dividend so that all my divs are showing monthly)
The rentals would be hands free (property management company would handle everything once I bought and got it rent ready).
I wanted to get your opinions on what would be the best return possibility and why. I don't care about owning tangible but I like that real estate is harder to get defrauded in (companies fibbing on their reports etc).
My goal is to generate wealth and passive income. I am 32 currently so I don't need to realize any income from this on paper and wont rely on it. I just want it to snowball and for it to handle itself.
The wife and I make about 150k worth of W2 and probably another 75k before taxes from my consulting and side businesses. Looking to take all of that side business money and either grow it, defer taxes and invest it, etc. The goal is to grow wealth while mitigating tax liability etc.
Sorry if this has been covered before. (As I am sure it has been I just keep getting 9000 posts from the same thread when I search and they dont do a good job of explaining why people chose certain things)
have 50k in stocks, currently about 30k in southern company and the rest is mixed across high income funds (DHF PHK PHT etc).....
I have 20k liquid in an account. I am torn as to whether I should liquidate my stocks and start going hot and heavy into rental properties or if I should add the 20k to the 50k that is already working for me in some fashion. Right now the stocks are earning me like 300 a month in income (when you spread out the SO dividend so that all my divs are showing monthly)
The rentals would be hands free (property management company would handle everything once I bought and got it rent ready).
I wanted to get your opinions on what would be the best return possibility and why. I don't care about owning tangible but I like that real estate is harder to get defrauded in (companies fibbing on their reports etc).
My goal is to generate wealth and passive income. I am 32 currently so I don't need to realize any income from this on paper and wont rely on it. I just want it to snowball and for it to handle itself.
The wife and I make about 150k worth of W2 and probably another 75k before taxes from my consulting and side businesses. Looking to take all of that side business money and either grow it, defer taxes and invest it, etc. The goal is to grow wealth while mitigating tax liability etc.
Sorry if this has been covered before. (As I am sure it has been I just keep getting 9000 posts from the same thread when I search and they dont do a good job of explaining why people chose certain things)
12
Posted on 9/16/18 at 5:13 pm to plaric
Paging Fat Bastard....
Posted on 9/16/18 at 5:46 pm to castorinho
Does he already have a thread dedicated to this? If so, point me in that direction and I won’t bug anyone ;-P
Posted on 9/16/18 at 5:48 pm to plaric
Based on the numbers and tickers you gave, your stock and funds achieve an average 7-9% dividend/distribution yield annually. Now I'm not a real estate investor, but you may have difficulty beating that number with your cash-on-cash return for 3 reasons:
1. You'll be using a property management company that'll take a bite out of your profits.
2. We have no idea what kind of real estate you'll be looking to get into. I'm not just talking about commercial vs residential because the returns on residentials can vary quite a bit from one to the next.
3. Based on this post, we have no idea what kind of experience, if any, you have with real estate rentals. If you're new, expect some bumps as you learn.
Now, I'll mention here that I don't expect much asset appreciation for your current portfolio based on historical results. The real estate, on the other hand, likely would, but even if it didn't, your renters should be paying the mortgage for you anyway.
As far as real estate cash-on-cash returns go, I've seen some people on biggerpockets.com say they look for 8-12%. Others are looking for 20% or more. Who knows what you'd get based on 1-3 above. I think you'll need to do some reading and look at potential rentals so you can crunch some numbers to get an idea.
Also, listen to Fat Bastard and I Love Bama. There are others here as well (baldona, I think?).
1. You'll be using a property management company that'll take a bite out of your profits.
2. We have no idea what kind of real estate you'll be looking to get into. I'm not just talking about commercial vs residential because the returns on residentials can vary quite a bit from one to the next.
3. Based on this post, we have no idea what kind of experience, if any, you have with real estate rentals. If you're new, expect some bumps as you learn.
Now, I'll mention here that I don't expect much asset appreciation for your current portfolio based on historical results. The real estate, on the other hand, likely would, but even if it didn't, your renters should be paying the mortgage for you anyway.
As far as real estate cash-on-cash returns go, I've seen some people on biggerpockets.com say they look for 8-12%. Others are looking for 20% or more. Who knows what you'd get based on 1-3 above. I think you'll need to do some reading and look at potential rentals so you can crunch some numbers to get an idea.
Also, listen to Fat Bastard and I Love Bama. There are others here as well (baldona, I think?).
Posted on 9/16/18 at 5:53 pm to Omada
Yeah....my returns are decent. I have most in SO but I’m playing with what appears to be relatively risky income funds.
Dunno. Just trying to make the best decisions. Zero rental experience. I live in montgomery al which has a good market based on research. If I did rentals it would be sfh and mfh. No commercial until I built a portfolio and learned.
Dunno. Just trying to make the best decisions. Zero rental experience. I live in montgomery al which has a good market based on research. If I did rentals it would be sfh and mfh. No commercial until I built a portfolio and learned.
Posted on 9/16/18 at 6:06 pm to plaric
Have you considered adding some REITs or MLPs to your portfolio instead? They'd fit a passive approach, but they could be a PITA at tax time. Here is an old post of mine trying to identify good MLP's. I haven't kept up with any of the names, but it's something to read if you're interested.
There are also the Dividend Aristocrats to consider.
There are also the Dividend Aristocrats to consider.
Posted on 9/16/18 at 6:08 pm to Omada
Thanks. Yeah one thing that had me thinking about all of this was that some of my dividends aren’t preferred. So they are taxed ddifferently. I will read your thread. Thanks! I have been looking at REITS
Edit: I’m trying to learn as much as I can. I am having trouble figuring out what information online is true and what is just people trying to sell their next ebook and bump the stock that are trying to unload.
Edit: I’m trying to learn as much as I can. I am having trouble figuring out what information online is true and what is just people trying to sell their next ebook and bump the stock that are trying to unload.
This post was edited on 9/16/18 at 6:15 pm
Posted on 9/16/18 at 6:19 pm to plaric
I decided to take a portion of my stock portfolio and buy rentals this year. Bought 3 units with cash and did repairs. Was making 7-9% on stocks and expecting around 17% on rentals. Bought all 3 properties within walking distance of my house form same seller who was motivated to sell. Got a very good price and all are rented now. I will not buy a property that the expected rent will not pay for purchase price plus repairs in 5 years. Expecting these to return capital in about 50 months and I am happy with decision. May buy 1 or 2 more next year if I can get them for my price. I have a sister and brother that have multiple rentals and I use the same method that has worked for them.
Posted on 9/16/18 at 6:29 pm to jerryc436
What is your method specifically?
Posted on 9/16/18 at 6:51 pm to plaric
Specifically, I look for houses that I can buy at a price that I can receive enough rent to replace my money in 4-5 years. I bought my last 2 for 28K and put 22K into them to make them livable and more attractive. My 50K investment is giving me $1075 a month in rent. I use 10 months of rent for income and the other two for insurance and repairs. I may be a little off but I believe my return is double what i was getting in the market. This is my first year so I will have a better idea after I do my taxes next year. I am expecting a pretty good loss as one of the houses had extensive repairs before it was habitable. I live in a very small town so houses are affordable.
Posted on 9/16/18 at 6:54 pm to plaric
quote:the biggest youtube clickbait
wealth and passive income
Posted on 9/16/18 at 7:02 pm to jimbeam
Ikr. Hence my apprehension. Can’t tell who is for real out there and who is just looking to sell a book haha
Posted on 9/16/18 at 7:03 pm to jerryc436
Thanks for the insight brother!
My city appears to have a strong market with affordable housing as well. Doing more research.
My city appears to have a strong market with affordable housing as well. Doing more research.
Posted on 9/16/18 at 8:49 pm to jerryc436
Where are you buying?
Posted on 9/16/18 at 8:50 pm to castorinho
LOL.
Posted on 9/16/18 at 8:51 pm to plaric
Both are great.
ILL POST A link here tomorrow for you.
ILL POST A link here tomorrow for you.
Posted on 9/16/18 at 8:56 pm to Fat Bastard
Thanks!
Posted on 9/16/18 at 9:39 pm to plaric
There is no such thing as owning rentals that are hands free. Even with management there are things you have to handle, decisions you have to make, etc. Also do not invest in real estate without having plenty of reserves. You never know if an A/C will go out or things will break. If you can’t afford to come up with money on top of your initial investment you’re better off sticking to stocks (or REITs if you’re looking for RE exposure).
Posted on 9/16/18 at 10:13 pm to plaric
Well you going to be leveraged and illiquid in real estate so take consideration. If the rentals are profitable and hold their value and you can manage them the real estate leverage can help you. If not profitable it can hurt you.
Posted on 9/16/18 at 10:29 pm to I B Freeman
They are not mutually exclusive.
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