Originally Posted by
SonicFlyer
Stocks take into account inflation too because companies have to raise prices. Entirely correct. The real return of the market is roughly 6% add in 3% inflation and you get roughly 9%, which is enough to double in 8 years.
Real estate is high risk because if there is a market downturn in real estate you can get hosed, especially if you're leveraged. The same is true of equities, but you only lose if you sell. The difference with income properties, is that you still have income from rent. In a down market, you often have upward pressure on rents, because of rising interest rates and lower available capital for a down payment.
Owning tens of thousands of stocks properly diversified across multiple asset categories is the safest investment (lowest risk) for the highest amount of return. Portfolio should double ever 8 years if done right. The same applies to real estate. Owning multiple properties in several stable markets (i.e. not coastal) is a smart strategy.
Originally Posted by
Tummy
I might consider margin on equities if the leverage were non-recourse, but I haven't come across a non recourse margin account. The reality is the leverage does increase risk, even with non-recourse financing. Many people richer than me (Dave Ramsey comes to mind) only invest with cash. Others with even more money have gotten there with leverage, including a couple people I call friends. I've been both a cash and a leveraged investor, depending on the nature of the property. The key to success if using leverage is having sufficient debt coverage ratios and adequate reserves, while investing in stable properties. I like single family, multi family, RV/Trailer parks and self-storage. I stay away from retail strip centers, but would consider a single tenant NNN property that doesn't exceed 15% of my portfolio.
Originally Posted by
123494
Diversification is key. I've got the index funds and all in retirement and taxable accounts, but real estate helps diversify even more. Although if I had $100k to use, I can only buy $100k in stocks. 100k in real estate can be leveraged for a 400k property.
I agree completely on the diversification front. For the last decade and change, I've put a similar amounts into retirement accounts (mostly index funds and BRK stock) and real estate. One of those is now much larger than the other and produces cash flow that is spendable before 59 1/2. It took quite a bit of effort, but still less work and more pay than flying planes.