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Home >> Stock Forums >> The Truth About Real Estate Investing - Is It Right For You?

The Truth About Real Estate Investing - Is It Right For You?

marianr said: "You have probably been hearing, seeing and reading that real estate investing is the best thing since sliced bread. There are many late night cable television infomercials spewing out sales pitches for courses that teach you how to buy residential real estate no money down or for next to nothing. Furthermore, polished pitch men on the advertisement emphasize that it is so easy that anybody can do it. They smugly show you that it is simple as they pencil out on the back of a napkin how you will supposedly make a fortune in real estate. Then these real estate investment course promoters show "actual" interviews of people who have reportedly made gobs of money with the course system. Although it is true that fortunes can be made in real estate it is actually more likely that it will be the guru owner of the real estate course than you! The reason is that real estate investing is a lot harder than most people realize. When you buy, rent, and sell real estate as opposed to stocks you are dealing directly with people and there is not organized exchange to keep things standardized. Don't forget that courts see it as their duty to protect the shelter of families even if they are non paying renters who are total deadbeats. Another problem is that many contractors who do odd fix up jobs for real estate rehabbers are drifters with as many personal and financial problems as bad tenants. They damage houses and are down the street as soon as they get a little cash out of the hapless real estate investor. It also takes many years to learn how to properly assess value in a town or neighborhood and get the required experience in real estate closings to not have the big profits you initially think you see in a deal leak out. The key point of this edition of the "Wallet Doctor" is that real estate investing is a business. Like any other business it requires constant dedication and education. If you work full time it means losing your free time to your rentals and rehabs. If a property doesn't sell or if the tenant doesn't pay you will have to lose part of your salary to cover the mortgage. You should enjoy your regular full time job because you selected it. If you prefer cookouts and trips to the beach over collecting rent and repairing your residential real estate investment then the stock market is a better place for you. ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., a.k.a. "The Wallet Doctor", is a successful futures trader, real estate investor, and stock investor. Dr. Brown holds a Ph.D. in finance from the University of South Carolina. His 1998 articles in Technical Analysis of Stocks and Commodities were prophetic in predicting an impending stock market crash. He has helped many people become profitable investors by teaching them to look out over many years to spot stocks that are low and primed for rise in the new bull market. His second article met with approval by Dr. Bob Shiller of Yale University. Dr. Shiller is the economist that Alan Greenspan most highly regards who coined the term "Irrational Exuberance." In 1998 he shouted to the world to "get out" of the stock market but now he is shouting to everyone that it is time to "get in!" The Wallet Doctor is not only sought after for investment advice and coaching in stock investing but also in futures trading and real estate investing."

okaythen said: "Don't forget that courts see it as their duty to protect the shelter of families even if they are non paying renters who are total deadbeats. can you elaborate on that?"

newinvestor123 said: "[QUOTE=nikhil_bathla2020;58250]Hi Marianr it feels good to see experienced people like you sharing their knowledge.I would like to add on to it for starters , For people who are new to investing in real estate its always always advisable to consult a realtor here are many benefits for a homebuyer to work with a REALTOR. For starters: * REALTORS have access to more listings and search features to help narrow down the right home. * REALTORS have access to homes that are not yet advertised and are often the first to know about new developments in the area. * REALTORS work to end housing discrimination and often give back to the communities where they live and work. * REALTORS adhere to a strict code of ethics. * REALTORS have access to the most current and most accurate sales price data to help you determine the best possible purchase price for the market. * REALTORS have a network of reliable professionals such as mortgage consultants, escrow companies, home inspectors, local contractors, and more. * REALTORS assist you with the due diligence process which can include the negotiation of repairs, discovering defects, termite inspections, zoning and use rights, HOA restrictions, easements on the property, water rights and conditions, and more. * REALTORS have access to relevant information and a duty to share material facts to help you make informed decisions. * REALTORS have the knowledge and experience to guide you through the homebuying process and protect you from harm. * REALTORS have access to their state’s “tried and true” contracts and forms needed to complete a real estate transaction. * REALTORS are the best people to objectively guide you through an often overwhelming process and to help you resolve issues and move the transaction through to closing. In this market, the best asset for a homebuyer is a great REALTOR with the negotiating skills and resources to find the best home possible… at the best price possible… and with the fewest problems possible. Check out my blog- realtydigest dot blogspot dot com[/QUOTE] Whoa. While it's true that a realtor will have access to information that the average prospective homebuyer will not, they work on COMMISSION. If you're buying a house (which I do not recommend right now) keep in mind that they profit when they sell you one, regardless of whether you are getting a good deal or not. I wonder what most realtors would tell a possible homebuyer about the housing market right now? :eek:"

okaythen said: "how come you don't recommend buying houses now? it's dirt cheap! I actually need to buy a house in the next year or 2, and am thinking about buying couple more for investing, it will use up most of my money but I think houses are at a all time low now. 5, 10 years from now I bet you will regret it big time if you don't buy some houses now, so can you explain why you recommend don't buy houses now?"

newinvestor123 said: "[QUOTE=okaythen;60356]how come you don't recommend buying houses now? it's dirt cheap! I actually need to buy a house in the next year or 2, and am thinking about buying couple more for investing, it will use up most of my money but I think houses are at a all time low now. 5, 10 years from now I bet you will regret it big time if you don't buy some houses now, so can you explain why you recommend don't buy houses now?[/QUOTE] Because I think foreclosures are going to continue to rise for at least another 3-6 months, AT LEAST, and now, we have fears of a recession and pretty widespread knowledge of the bubble bursting, which is going to keep people from buying all those extra homes. [url]http://www.nytimes.com/imagepages/2007/09/23/weekinreview/20070923_BAJAJ_GRAPHIC.html[/url] [url]http://www.superiorinvestor.net/showpost.php?p=53013&postcount=2[/url]"

Maverick Investor said: "I agree with okaythen. The current round of doom and gloom (based, I admit, in some reality) is scaring off amateur investors and wannabe investors. And that's a good thing! Real estate is always a good investment, looked at across the medium-long term. Look on any Rich List you want, and you'll find 60-80% of the people there either made it from RA, or now have the bulk of it tucked away in RA. Also, might I remind y'all of those couple of quotes relating to times like these? "I buy by straw hats in the winter" - Andrew Mellon (?) "The time to buy is when the blood is running in the streets" - A Rothschild Cheers!"

Airelon said: "As far as real estate [i]speculating[/i], I'll probably hold off for about a year. I do find it interesting the number of new posters that are so congratulatory and that ask such convenient questions to the OP."

FirefighterB said: "[QUOTE=Airelon;60432]I do find it interesting the number of new posters that are so congratulatory and that ask such convenient questions to the OP.[/QUOTE] Hahaha. Very strange. I wouldn't touch RE with a 10-foot pole unless you have to or find a tremendous deal. IMHO, we're nowhere near the bottom. Even prices NOW, although cheaper than last year or 05, are still ridiculous compared to 02."

newinvestor123 said: "[QUOTE=Maverick Investor;60431]Real estate is always a good investment, looked at across the medium-long term. Look on any Rich List you want, and you'll find 60-80% of the people there either made it from RA, or now have the bulk of it tucked away in RA. Also, might I remind y'all of those couple of quotes relating to times like these? "I buy by straw hats in the winter" - Andrew Mellon (?) "The time to buy is when the blood is running in the streets" - A Rothschild Cheers![/QUOTE] The belief that "real estate is always a good investment" is part of what caused the housing bubble in the first place. The fact is that a home's value, over the long term, barely keeps pace with inflation. If you can get a large tract of land and sell it off twenty years down the road to a developer, or sell lots off yourself, you stand to make some good money even after inflation - But a home in 1997 was only worth about 10% more than a home in 1900 ex inflation. That's less than .1% annualized return. It's good to buy when there's blood running in the streets, but it's bad to catch a falling knife. The trick is knowing when sufficient blood has been let to warrant an investment, and I don't think housing is anywhere close to a bottom. Of course, factors vary between regional and local markets. If you can find a home in an area that didn't appreciate very much during the boom, it probably won't depreciate much through the rest of the bust. But generally speaking, I wouldn't buy a house right now, unless you can get one at it's late 90's value."

Maverick Investor said: "[QUOTE=newinvestor123;60477]The belief that "real estate is always a good investment" is part of what caused the housing bubble in the first place. The fact is that a home's value, over the long term, barely keeps pace with inflation. If you can get a large tract of land and sell it off twenty years down the road to a developer, or sell lots off yourself, you stand to make some good money even after inflation - But a home in 1997 was only worth about 10% more than a home in 1900 ex inflation. That's less than .1% annualized return. [/QUOTE] Is that true in the US? I'm very surprised. Here in the UK, real estate has [I]averaged[/I] 8-10% p.a. over the last 50+ years. Maybe it's because we've got less land and more people per square mile? I'm still looking out for opportunities in the US, though. I have sources offering me properties at 30% or more below market value (though I can see that in itself being contentious!) but with rental yields of up over 25% - which is virtually unheard of the the UK. Plus, the fact the dollar is so week means i can get a lot of bang for my buck over there right now. The only downside is having to do everything remotely, as i have absolutely no interest in visiting the States again until there's been a regime change, and it's once again the welcoming place it once was. (Being dragged down to London to personally apply for a visa? Finger-printing and retina scans on arrival? Forget it!) Cheers!"

newinvestor123 said: "According to this, is is: [IMG]http://www.speculativebubble.com/images/homevalues1.gif[/IMG] Ahhh... You live in the UK. The favorable conversion rate could offset a lot of the risk of a further decline in the housing market - But how would you calculate whether it was a good deal or not? That's a toughie, and I have no idea how to go about figuring it out..."

Airelon said: "Quite honestly, I rarely benchmark a possesion I've bought against the inflation rate. Now my ROR? Yes, that I'll put up against inflation, because it's my money 'working for me' in an economy with an adjustable rate dollar. But an item I purchase? Eventually, everything I purchase is affected by the inflation rate, so I'm really not too concerned on that route."

newinvestor123 said: "[QUOTE=Airelon;60497]Quite honestly, I rarely benchmark a possesion I've bought against the inflation rate. Now my ROR? Yes, that I'll put up against inflation, because it's my money 'working for me' in an economy with an adjustable rate dollar. But an item I purchase? Eventually, everything I purchase is affected by the inflation rate, so I'm really not too concerned on that route.[/QUOTE] What? Here's a good article on housing, Maverick: [url]http://www.seekingalpha.com/article/58692-don-t-expect-a-housing-bottom-until-late-2009[/url]"

Airelon said: "[QUOTE=newinvestor123;60508]What? Here's a good article on housing, Maverick: [url]http://www.seekingalpha.com/article/58692-don-t-expect-a-housing-bottom-until-late-2009[/url][/QUOTE] That's still no reason to benchmark a purchase by the inflation rate. Well, I see the point, but I refuse to allow it to scare me off completely from being a buyer. The inflation rate is a measure of the average of all sectors. If a material purchase rises with the inflation rate ([I]which it has more than out performed in my market[/I]) then all is cool. Bubble's deflate, but generally, never rubberband lower than the inflation rate. Plus, seekingalpha were the same guys who stated that it was a bad idea to dividend invest, and he was using tax laws that were out of date. Inflation rate is averaging around the low 3%'s. I think last month it jumped up to 4.31%. Houses in the 1990's in my market were going for $200k (For a 2500 sqr foot plus). At one point, those homes were selling for $600k. Michigan is one of the hardest hit areas with real estate, and those 2500 sqr foot plus homes are still on the market for 250k. Below the inflation rate, however, it's the same as a rubberbanding spot rate / futures rate. You want to be a buyer when your spot rate is lowest. So though they are below inflation? The bubble bursting comes to an end at some point. I don't own my home, because like I mentioned over at my blog some time back, I knew the late 90's was an insane time to be buying a home anyway. I wasn't a buyer. I'll be looking to be a buyer at Real Estate here, in another year. It's below the inflation rate. All things rubberband, and thus - will buy below. Buy low. Sell high. Charge rent inbetween. Name of the game. :)"

newinvestor123 said: "[QUOTE=Airelon;60513]That's still no reason to benchmark a purchase by the inflation rate. Well, I see the point, but I refuse to allow it to scare me off completely from being a buyer. The inflation rate is a measure of the average of all sectors. If a material purchase rises with the inflation rate ([I]which it has more than out performed in my market[/I]) then all is cool. Bubble's deflate, but generally, never rubberband lower than the inflation rate. Inflation rate is averaging around the low 3%'s. I think last month it jumped up to 4.31%. Houses in the 1990's in my market were going for $200k (For a 2500 sqr foot plus). At one point, those homes were selling for $600k. Michigan is one of the hardest hit areas with real estate, and those 2500 sqr foot plus homes are still on the market for 250k. Below the inflation rate, however, it's the same as a rubberbanding spot rate / futures rate. You want to be a buyer when your spot rate is lowest. So though they are below inflation? The bubble bursting comes to an end at some point. I don't own my home, because like I mentioned over at my blog some time back, I knew the late 90's was an insane time to be buying a home anyway. I wasn't a buyer. I'll be looking to be a buyer at Real Estate here, in another year. It's below the inflation rate. All things rubberband, and thus - will buy below. Buy low. Sell high. Charge rent inbetween. Name of the game. :)[/QUOTE] Well sure - If you can get a house below the compounded inflation rate for the last ten years, at or near the price it was at before the housing bubble, then it's probably going to be a great deal, but I don't think a 30% cut below market value would do it for me at this point in time, unless the local market I was buying in only appreciated 20-30% in the last ten years. Whether a home is a good deal or not is ultimately up to the buyer's diligence in analyzing the local market. If I could buy a house here in Warner Robins, GA at a 30% discount to fair market value, I would jump on it for two reasons: Warner Robins didn't participate in the housing boom to the extent that more populated areas did, and it is next to a large Air Force Base, which lends some stability to the local market. But even here, the situation sucks. I ask my landlady/realtor if the market has picked up every time I see her to pay my rent, and for the last three months, I've been getting dirty looks. :laugh: The bubble bursting will come to an end at some point, but it seems many people either forget or don't know that the housing market is like the Titanic - It takes a long time to turn around. A ten year housing bubble isn't going to find the bottom in one year, regardless of what the talking heads say and the realtors want you to believe. In housing, it can take a long time to reach fair market value because of the relatively low number of transactions being carried out. But that's not the point I was trying to make. I'm saying that, over the long term, a home is only a place to live, not an investment, unless you buy and sell at the right times, rent it out, parse the land and sell it in lots, or increase it's worth through additions - An investment, to my mind, appreciates significantly in real value over time, and the average home clearly does not fit that definition. Yeah, we could be at a bottom here, but I doubt it. ARM resets, a slowing economy, overall sentiment, and the Shiller Used Home Index all suggest we still have a ways to fall. It's only my opinion, take it for what it's worth."

Airelon said: "Probably should have specified my outlook. I agree on the 'investment' route. That's something my Dad and I argue about every time we discuss economics. Which are enjoyable discussions. My Dad is one of the few people I know in real life, that I can have enjoyable, intelligent economic discussions with. I often tell him: "A purchase of a house is one of the biggest [i][b]unrealized[/i][/b] long term gains you'll ever have". He never understands my point - but we have fun discussing it. I will never be 'looking' to own my own home. It may happen, but no matter how much wealth I amass, I just don't see the sense in it. It makes much more sense to me to rent a $250k to $300k home, than it does to own it. That being said, I will look to buy such properties in the future, to rent them out. But I want to get the best price for the initial purchase. A good friend of mine turned me onto that strategy some time ago. He's a very well known individual in this county. Owned a very successful locksmith company. But has never bought his home. He lives in a gorgeous 2500 sqr foot plus home. And he owns many rental properties throughout the area. But he rents his current residence from a doctor friend of his. Just looking at balance sheets, taxes, overhead of owning your own home and income from rental? Just seems to make the most sense to me."

Airelon said: "As far as the current situation, I'm torn between buying now, and holding off for a year. People around here are losing their 90's homes left and right. They don't want to move into an apartment. So what do they do? Rent. So it's a matter of do I view the situation as getting worse and hold off on buying rental properties? Or do I buy now and rent immediately? I'm going to hold off for a year before I'm a buyer. I don't think we've hit bottom yet, and want to wait before I enter the rental game."

newinvestor123 said: "[QUOTE=Airelon;60520]Just looking at balance sheets, taxes, overhead of owning your own home and income from rental? Just seems to make the most sense to me.[/QUOTE] Totally agree there. The only benefit to owning your own home, as far as I can tell, is the satisfaction of owning your own home. lol..."

Airelon said: "[QUOTE=newinvestor123;60528]Totally agree there. The only benefit to owning your own home, as far as I can tell, is the satisfaction of owning your own home. lol...[/QUOTE] And I'm such a freaking cheap-skate, that this just doesn't do it for me . . . :D"

Rbreb13 said: "[QUOTE=Airelon;60529]And I'm such a freaking cheap-skate, that this just doesn't do it for me . . . :D[/QUOTE]Actually thats the reason that I own my trailer. Rents around here for a comparable abode are $1000+/month. My lot rent is only $380/month. I paid $2800 for my POS trailer 20 years ago. Its worth about $10k right now if I were to sell it. The lot space alone is worth $10k, the trailer is basically worth nothing. But the cheaper rent more than makes up for it."

okaythen said: "[QUOTE=newinvestor123;60492]According to this, is is: Ahhh... You live in the UK. The favorable conversion rate could offset a lot of the risk of a further decline in the housing market - But how would you calculate whether it was a good deal or not? That's a toughie, and I have no idea how to go about figuring it out...[/QUOTE] is there an estimate of where RE will drop to in the chart??"

Heather said: "Right now they are almost giving away homes that are in foreclosure around here. I was reading a series on the "foreclosure crisis" and right now some homes are being auctioned off for like a dollar to $150.00. The only problem is, the (absent) investment companies and landlords are getting all of their copper wiring (and anything else with value) stolen from inside the home. They said one community has 1,500 houses that are abandoned/foreclosed on.. all of these nuisance buildings just fall into greater disrepair and the neighborhood already has high crime."

okaythen said: "where you at"

lions4ever said: "Although this is an old post I thought it could be interesting to mention a [B]Forbes[/B] [B]magazine[/B]' article (yesterday) about "[B]America's Worst-Selling Housing Markets[/B]". Quote: "[I]To find the worst-selling housing markets in the U.S., we looked for markets in the 40 largest metro areas that have lost value in year-over-year terms from the fourth quarter. We also looked at their most recent reporting periods and how quickly they have been selling off their excess inventory. Those with sluggish sales rates and plummeting prices were deemed as sedentary. Data are from the National Association of Realtors and ZipRealty.[/I]" Ranking #1 is Miami. Median price: $345,900; Percent change: -5.7%; Unsold homes: 81,613; Sales rate: 0.2% per month. #2 Orlando. Median price: $240,400; Percent change: -11.7%; Unsold homes: 34,384 and Sales rate: 0.6% per month. #4 Tampa. Median price: $201,600; Percent change: -12.2%; Unsold homes: 56,491; Sales rate: 0.8% per month. #5 Los Angeles. Median price: $509,700; Percent change: -13.1%; Unsold homes: 100,770; Sales rate: 2% per month. #6 Washington, D.C. Median price: $400,100; Percent change: -5.1%; Unsold homes: 47,432 and Sales rate: 2.2% per month. #7 Chicago, Ill. Median price: $261,000; Percent change: -2.6%; Unsold homes: 72,842; Sales rate: 2.3% per month #8 Baltimore, Md. Median price: $275,100; Percent change: -1%; Unsold homes: 9,210; Sales rate: 2.5% per month #9 San Diego, Calif. Median price: $522,900; Percent change: -9.8%; Unsold homes: 18,450; Sales rate: 2.7% per month #10 Denver, Colo. Median price: $230,100; Percent change: -6.3%; Unsold homes: 21,756; Sales rate: 2.9% per month."

okaythen said: "[QUOTE=lions4ever;67418]Although this is an old post I thought it could be interesting to mention a [B]Forbes[/B] [B]magazine[/B]' article (yesterday) about "[B]America's Worst-Selling Housing Markets[/B]". Quote: "[I]To find the worst-selling housing markets in the U.S., we looked for markets in the 40 largest metro areas that have lost value in year-over-year terms from the fourth quarter. We also looked at their most recent reporting periods and how quickly they have been selling off their excess inventory. Those with sluggish sales rates and plummeting prices were deemed as sedentary. Data are from the National Association of Realtors and ZipRealty.[/I]" Ranking #1 is Miami. Median price: $345,900; Percent change: -5.7%; Unsold homes: 81,613; Sales rate: 0.2% per month. #2 Orlando. Median price: $240,400; Percent change: -11.7%; Unsold homes: 34,384 and Sales rate: 0.6% per month. #4 Tampa. Median price: $201,600; Percent change: -12.2%; Unsold homes: 56,491; Sales rate: 0.8% per month. #5 Los Angeles. Median price: $509,700; Percent change: -13.1%; Unsold homes: 100,770; Sales rate: 2% per month. #6 Washington, D.C. Median price: $400,100; Percent change: -5.1%; Unsold homes: 47,432 and Sales rate: 2.2% per month. #7 Chicago, Ill. Median price: $261,000; Percent change: -2.6%; Unsold homes: 72,842; Sales rate: 2.3% per month #8 Baltimore, Md. Median price: $275,100; Percent change: -1%; Unsold homes: 9,210; Sales rate: 2.5% per month #9 San Diego, Calif. Median price: $522,900; Percent change: -9.8%; Unsold homes: 18,450; Sales rate: 2.7% per month #10 Denver, Colo. Median price: $230,100; Percent change: -6.3%; Unsold homes: 21,756; Sales rate: 2.9% per month.[/QUOTE] how long is the study? is it just after the subprime crisis? maybe those cities are good to invest in right now? what do you think. Since it's so cheap now maybe buy several then 5, 10 years later they should appreciate a lot, doubt they will keep on going down. what do you guys think. another question do you guys think Texas is a good state to invest in RE right now? thinking about moving there. thanks"

pranith said: "well courts will protect us in order to provide us shelter.i think there will not be any problem."

lions4ever said: "[QUOTE=okaythen;67443]how long is the study? is it just after the subprime crisis? maybe those cities are good to invest in right now? what do you think. Since it's so cheap now maybe buy several then 5, 10 years later they should appreciate a lot, doubt they will keep on going down. what do you guys think. another question do you guys think Texas is a good state to invest in RE right now? thinking about moving there. thanks[/QUOTE] America's Worst-Selling Housing Markets was written by Matt Woolsey on the 15th of April. I think is still too soon. I would rather wait another month or so just to watch how much more these selling housing markets will fall but I will pay a serious attention into it. However you are fully right on your observation. Normally these are the greatest opportunities to make oustanding profits. :whacky011:"

lions4ever said: "PriceewaterhouseCoopers also completed a great study on the worldwide housing markets with more potential. On top one may find Moscow, Russia (also considered risky due to the local high levels of corruption) and Istambul (Turkey). Both cities are leading in both investment opportunity and development forecast. Other great spots to invest on this market are: Munich, Hamburg, Lyon, Paris, Prague, Warsaw, Stockolm and Helsinquia . On the Asia region the best are Abu Dhabi and Dubai. At the downside is London which market value is devaluating over and over again since the mid of last year."

tomtat1 said: "[QUOTE=newinvestor123;60477]The belief that "real estate is always a good investment" is part of what caused the housing bubble in the first place. The fact is that a home's value, over the long term, barely keeps pace with inflation. If you can get a large tract of land and sell it off twenty years down the road to a developer, or sell lots off yourself, you stand to make some good money even after inflation - But a home in 1997 was only worth about 10% more than a home in 1900 ex inflation. That's less than .1% annualized return. It's good to buy when there's blood running in the streets, but it's bad to catch a falling knife. The trick is knowing when sufficient blood has been let to warrant an investment, and I don't think housing is anywhere close to a bottom. Of course, factors vary between regional and local markets. If you can find a home in an area that didn't appreciate very much during the boom, it probably won't depreciate much through the rest of the bust. But generally speaking, I wouldn't buy a house right now, unless you can get one at it's late 90's value.[/QUOTE] While I agree with you on what you are saying about timing (prices will get lower before they rebound), I feel that you don’t understand the advantages that make real-estate a good investment even if it grows just 3% per year (although I would argue that if you are smart you will do better than 3%). The advantages are Leverage and tax considerations. You can routinely leverage real-estate at 80% Debt to 20% equity. What other investment asset can you do this with? What that translates to is the 3% gain on the property turns into a 15% gain on invested capital. If a $100,000 property goes up 3%, the $20,000 you have in it goes up 15% (3000/20000). Next tax advantages. While your asset is appreciating (3%) you can actually depreciate it (the building not the land) from the price you paid to zero over 29.5 years for tax purposes. You can use this depreciation to offset whatever income the building throws off or any other income you might make if you set it up properly. But that isn’t the big tax advantage. The big tax advantage comes when you pull money out tax free upon refinancing. Let’s say you own a property for 10 years appreciating at the 3% you state. A 100,000 building will be worth about 130,000. Refinancing this building back to 80/20 will throw off 24,000 tax free (I am assuming interest only loans for simplicity, in reality the amount would actually be larger but the difference would be recapturing the principal you had paid in over the last 10 years). It is tax free because on paper you haven’t made a dime. You have simply taken out a larger loan on an appreciating asset. Your actual equity also has grown from 20,000 to 26,000. In this way you can take cash from a property indefinitely and not pay taxes. And if the property becomes too old for your liking you can exchange it for a newer one tax free (It’s called a like kind exchange under section 1031 of the tax code). Try that with a stock or bond."

ratAphooey said: "I think everyone agreed with you TomTat when credit was easy to get. But if you couple diminishing property values with interest only mortgages you can still easily have a disaster on your hand."

tomtat1 said: "[QUOTE=ratAphooey;68989]I think everyone agreed with you TomTat when credit was easy to get. But if you couple diminishing property values with interest only mortgages you can still easily have a disaster on your hand.[/QUOTE] Yes you can! I am not one who promotes zero down get rich quick real-estate Strategies (these are all scams in my opinion). You have to be smart, and understand your risks to succeed, just like any other form of investing. Real-estate is not the magic asset that guarantees wealth if you invest in it (that doesn’t exist). The point of my post was simply that you can not judge Real-estate as a bad investment simply because it has historically only gained 3%. There are other factors at play. These other factors are enough to consider it as a portion of your overall investment plan. I certainly don’t advocate owning it exclusively, but it makes a nice addition to stocks, bonds, commodities, and cash in an overall investment plan."

AlfredSokol said: "I think TomTat makes some good points. 3% or not, I know a woman who's house is $325,000 now and she paid $22K in the 1970s. That investment worked out great for her."

tomtat1 said: "[QUOTE=Maverick Investor;60431] Look on any Rich List you want, and you'll find 60-80% of the people there either made it from RA, or now have the bulk of it tucked away in RA. [/QUOTE] A lot of wealthy people own real-estate because of the tax benefits. The higher your tax bracket, the more real-estate makes sense as an investment. I'm not sure which list you are looking at, but most of the richest people in the world made the bulk of there money through large stakes in a single company. They all own some real-estate of course, but to say they got to where they are through real-estate investment just isn't accurate."

Darren said: "If you can hold real estate for 25 years it's nearly impossible to lose. At least in good neighborhoods. But owning property can be a daunting task for many people, especially if they're responsible for maintenance."