My investment portfolio earned 16% over the last 12 months, 1.8 mill would give $288k (plus dividends?) and would be taxed at less than half my income rate. Plus zero work.
I think a lot of interesting points were made. The one about Trump was interesting - I believe he has not beaten the S&P in any significant way based on the money he inherited from his father. Real estate isn't worth my time, I agree if you have low salary and need supplement it is an opportunity you have an opportunity to invest significant labor - finding, rehabbing, screening, etc. I agree it doesn't feel like much. A few hours here and there. I like going back to chat up my neighbors/friends.
My one property has probably made me $150k in 4 years. For that I have about $200k tied up - so 75%. But if I was faced with dealing with 7 rentals to double my money (buying during ideal times and tax cannot cash out refinance) vs investing in stock (internet down due to Harvey) but I would guess 60% return - I would absolutely choose the carefree 60%. I didn't choose to go into rentals - just thought it would be a better investment to rent than sell and it has been.
People all talk about how rents don't decline but that hasn't played out in Houston. Rents have dropped by 17% in the last couple years.
I agree you hear a lot about success stories - gambling, stocks, and rentals. I could pick some great company stocks but high risk. I could buy some real estate but risky - oil prices are in the toilet, lots of lux apartments were built based on oil and rental prices, and trump's war on ACA fed uncertainty into the medical field - Houston is hurting.
But I'm not interested in living 20 miles from any investments or anywhere permanent and I don't need to risk rentals or deal with tenants to retire early. Time spent on rentals is not worth more than time spent at my primary job. It just depends on your individual circumstances.
I will stay out of politics, and Trump may not have beaten the S&P, based on his previous and current NW, but he has lived an extravagant lifestyle because of real estate. Buffet beats the S&P (sometimes), but comparatively lives like a pauper. If you added the money Trump spent that could have been reinvested, it may well exceed the S&P. But beating the S&P is something that virtually no money manager can do.
I too have a solid investment portfolio, which I think if you are invested in RE you need to have first. My investments should give out dividends, but gains could well be negative. Real Estate investing is for cash flow, not appreciation. Any appreciation is a bonus. Any one that invests for appreciation is a speculator, not an investor.
Rentals give me, and others, the tax benefits of a business. I can shelter the first ~$100K I bring in with depreciation and business expenses (0% tax rate). It is a solid income in good stock market times and bad, and generally will out pace inflation. It provides another leg to retirement, in addition to investments, pension, VA payments and other benefits I have. It can be work, or not. I could hire a PM, but I save $25k+ doing it myself. Just to handle a few calls a month across 25 tenants. Doing maintenance probably saves another $25K+.
Once you have a real estate portfolio you get the golden handcuffs put on. Selling is a hard option due to taxes. Putting that same money to work in the market does not equate to the same cash flow. 1031 exchanges and property managers are a way to reduce your effort. You have to do something during your 24 hours a day, why not work for yourself?
Real Estate is not for everyone, and certainly should not be anyone's first investment, at least not in a typical landlord sense. Maybe a REIT, but not being a landlord. Maybe you get lucky, maybe not. If you get a bad tenant, it could wipe you out. I have had many bad ones, until I figured it out.
I kicked out a woman with stage 4 terminal breast cancer that several of her family members called to plead me to drop the eviction. Nope, out she went. She died six month's later. I have no regrets, other than I should have done it sooner. As it was, I only owned the building four days when I filed the eviction. I should have done it day one.
And all this talk about how fearful everyone is about real estate, most of the same people here say to buy a home, not rent. A home is a great value, and you can gain equity. You can control your housing costs. That my friends, is also real estate investing. Just a different flavor.
