Real estate seems like a stupid investment vehicle

  • #1
SlurrerOfSpeech
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In the hottest of hot real estate markets you may see a house price go up 1x over 5 years and the owner may be able to capture 0.75x of that (after we subtract costs of property taxes, remodels, HOA dues, etc.). On the other hand, during a Bull Market in stocks there is the potential to for your holdings to appreciate 3x, 5x, 10x, 20x, 100x, etc., in completely liquid assets with no holding costs. Furthermore, if you own dividend-paying stocks then you make money even if there's a Bear Market, whereas in a sinking real estate market you start losing money because you can't rent the house for more than the mortgage costs.
 

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  • #2
FactChecker
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On average, the stock market will not go up that much even in a bull market. You can invest in real estate through a Real Estate Investment Trust (REIT) indexed fund. REITs were very hot a few years ago. They may be over priced now. Some people like to include some REIT investments in a diversified portfolio because they can soften the swings of the stock market. A REIT indexed fund tends to have more volatility than the S&P 500, but tend to be uncorrelated with it.
 
  • #3
Borek
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a house price go up 1x

Going up 1 times means not changing value at all.
 
  • #4
SlurrerOfSpeech
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Going up 1 times means not changing value at all.

I originally was going to write "going up 2x" to mean doubling, but I thought that would be misinterpreted as tripling.
 
  • #5
russ_watters
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On the other hand, during a Bull Market in stocks there is the potential to for your holdings to appreciate 3x, 5x, 10x, 20x, 100x, etc.,
Nonsense. When has a stock market ever even gone up 200%, much less 9900% in 5 years? ...only once I can see: the Nasdaq, from 1995-2000 went up 625%...before losing almost all of the gains in the next 3 years. What is more typical of the broader market indexes is about 8% per year.

What's nice about real estate is that if the economy tanks you can still live in your investment. Companies don't even print stock certificates anymore for you to tape together to use as a blanket if the market crashes.
 
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  • #6
scottdave
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100x increase? I'm guessing that ia for an individual stock.You can find occurances of this in historical charts. But to try to invest in something that will get that kind of performance is extremely difficult and rare.
 
  • #7
Noisy Rhysling
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"Buy land, they've stopped making it."
 
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  • #8
Vanadium 50
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Clearly the OP has shown that any investment that doesn't return 100x your money is, to use his word, stupid.
 
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