It was in a thread that started as a poll – your mortgage. I originally posted in an attempt to explain the difference with real estate and the basic stock market. The person that made the statement above I believe is involved in real estate and possibly stocks. In my 40 years of investing, I see one huge difference between the two and would like to point that out once again. Leverage.....

1. When you buy stock, you are basically purchasing a piece of paper backed up by a company or business that anticipates making a profit. If that company or business goes broke, your investment is completely gone, irregardless of the reason (fraud is one). You must use your money to buy all the stock unless you decide to purchase options. Options may also go down to being worth zero. There are many examples of this happening and not enough paper to visit all of those!

2. Real estate – there are many types but most fall into one of two categories:
investment real estate
personal residence

I believe there is a fairly good track record of nearly 100 years where neither of those has gone to zero, Certainly in my lifetime. ( even a meth house still has some value!)

Let's take a look at the difference in method of acquisition. Other than an option, you pay a price to purchase a share of stock (Piece of paper). Real estate affords the opportunity of placing a down payment on a property and obtaining a loan for the majority of the cost. This is pretty simplistic but I don't want to leave anything out.

My simple example which I picked out of thin air In the post last night, was purchasing a house for $100,000 with 20% ( $20,000) down payment and obtaining an 80% loan. I used a 5% annual appreciation/inflation rate but the person that made the post above used 6.1%. Let's go with that one. In one year, the $100,000 house is valued at $106,100 And would continue to grow slightly more each year as long as the 6.1% continued. The loan is a tiny bit less than the original $80,000. That means the equity, on paper, is now the difference between $106,100 and slightly less than $80,000 for a new equity of $26,100. The $20,000 down payment ( I'm well aware there are other closing costs but also potential credits and wanted to keep this simple) has grown to $26,100.I believe that is over 30% return on the amount invested...

I have not counted anything for the benefit of principal reduction or rent if this was an investment property or comfort of living if this was an owner occupied residence. I also did not count any of the tax benefits which would be Allowed for deduction of interest on personal residence or depreciation on investment property.

I have owned an unbelievable amount of real estate over decades and I don't believe any one of those was much less than 20% annual increase and if I average all of them together, with flips, great deals etc., it would be significantly more.

I wasn't sure whether I should post this or not, but wanted to furnish an exact example so the individual above would not think I was just making up a bunch of facts.......

On August 14, 2009 I purchased 154 units in Garland Texas for a price of $4,375,000. The down payment after additional costs and credits was in the EXACT amount of $1,385,553.79. Properties were located at 3809 and 3910 walnut if anyone would like to doubt my information. Simply check the MLS. I obtained the balance of the purchase price in a loan at 4.55%, 25 year amortization and 10 year balloon.

In the eight years of ownership, I received Net income after all expenses of $1.1 million.

On July 5, 2017 I closed on this sale for an amount of $8,750,000. After loan payoff, credits, costs and a 1.25% commission, I received a check in the amount of $5,857,711.82.

My total investment was the down payment of $1,385,553. My walkaway net was $5,857,000 plus the 1.1 million I had received in net income over the eight years. I'm not an accountant but there are numerous accountants on cougar board that could probably generate the actual annual rate of return I received. I would love someone to do that and see how much over the 20% I quoted the new percentage is.

I was not excited about the check I needed to pay to the IRS but determined to not do a 1031 exchange on this property. I still have several other large apartment complexes as well as single-family residences. Someone that owned stock would also need to pay income tax so it is irrelevant in this comparison.

I'm sure someone will try to shoot me down for bragging, but I take accusations like that seriously and wanted to give an actual fact based investment.