this is my last post on the issue - it's completely faulty to try and use your analysis to prove that ave stock market

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Jul 23, 2019
10:53:04pm

HarlemCoug All-American

this is my last post on the issue - it's completely faulty to try and use your analysis to prove that ave stock market

returns are better than average real estate returns.

The truth is - NO ONE KNOWS!!! And the reason they don't know is no one has the data on real estate deals. People don't know the revenues, the expenses, the cost of capital, the amount of leverage, the refinance proceeds and how they were reinvested etc.

And... we also don't know the amount of work put into a real estate deal - for instance - buy a home, fix it, and flip it... the value add piece of the equation makes it silly to try and compare it to stock market returns. The hours of work spent improving the real estate has to be part of the math... but no one has that kind of data on the trillions of dollars of real estate in the US.

There are simply too many unknowns in real estate for you to make your claim.

This message has been modified

Originally posted on Jul 23, 2019 at 10:53:04pm

Message parent changed from https://www.cougarboard.com/board/message.html?id=21996731 to https://www.cougarboard.com/board/message.html?id=21996608 by on Jul 23, 2019 at 10:58:11pm

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HarlemCoug

Previous username: Big12
Bio page: HarlemCoug
Joined: Sep 8, 2014
Last login: Apr 19, 2024
Total posts: 32,111 (4,003 FO)

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Messages

Author

Time

<< Deleted >>

DetmerForever

7/23/19 9:59pm

What about rental income?

titlecoug

7/23/19 10:02pm

Rental income rarely covers the mortgage payment plus all of the maintenance

DetmerForever

7/23/19 10:05pm

Bought one last week that is +$800 a month. After maintenance and repairs I'm

byubyu

7/23/19 10:13pm

Same. Got a vacation rental on Maui. Zero out of pocket for 7 years

7/23/19 10:16pm

Because he doesn't want to do the work of to find those properties

molodyets

7/23/19 10:17pm

This is not accurate. I don't know how many hundreds of times I have found

grandpacoug

7/24/19 3:31am

People buy bonds at a lower rate of return than rentals.

7/23/19 10:36pm

That isn't true.

YSMACK

7/24/19 7:42am

Lol, ok...I have a rental that produces well above and leaves me extra each

Romex

7/24/19 1:45pm

We investors all have that- except Detmer, I guess.....

grandpacoug

7/24/19 2:02pm

Strange....here is another thought...

cougsrule

7/23/19 10:09pm

I didn't buy my house as an investment but it is great when the place you live

O Gaucho

7/23/19 10:11pm

Comparing owner occupied home and rental home is the idiotic part!

grandpacoug

7/24/19 3:34am

terrible analysis - you completely ignore the utility gained from living in the real estate (or rent collected). It's

HarlemCoug

7/23/19 10:19pm

I'm talking about the investment returns. The OP said a home is where you live.

DetmerForever

7/23/19 10:24pm

you are completely ignoring the financial benefits of having a home - unless you have an alternative place to live that

HarlemCoug

7/23/19 10:33pm

This is a massively stupid concept. It is money you are spending anyway, why not get value back.

Tokolosh

7/23/19 10:19pm

I'm talking about investment returns.

DetmerForever

7/23/19 10:25pm

If that's the case, where is your calculation for rental income in your scenario

byubyu

7/23/19 10:30pm

Rental income is, on average, less than the mortgage payment and mtx cost.

DetmerForever

7/23/19 10:33pm

Even if true (which it is not) you used a 41 year time period.

byubyu

7/23/19 10:43pm

You mean rent goes up but mortgages stay the same?! SHOCKING

molodyets

7/24/19 12:22am

I'm not sure how 1968 to 2019 is 41 years - isn't it 50 years (or 51 depending

DetmerForever

7/24/19 1:03am

51 years makes it even worse for you.

byubyu

7/24/19 8:14am

If you think it's so easy to beat stock market returns with median homes

DetmerForever

7/24/19 12:02pm

This post is so incorrect! I gave a specific example of an apartment building

grandpacoug

7/24/19 3:37am

If you had $100,000 you had to invest within the next month what would you do?

Regal Ute

7/23/19 10:20pm

Bitcoin!

7/23/19 10:26pm

The problem with viewing your personal residence as merely an investment and

CougBlu

7/23/19 10:22pm

That's pure idiocy.

mulletino

7/23/19 10:23pm

He's well aware of that fact now. I feel for him.

CougBlu

7/23/19 10:25pm

So...just continue the idiocy forever until the landlord sells and he gets kicked out?

mulletino

7/23/19 10:30pm

🤷🏼‍♂️ He's close to retirement (within 5 years) and then they're moving.

CougBlu

7/23/19 10:40pm

People in my neighborhood renting their house pay over twice what my mortgage is

viper

7/23/19 10:31pm

Goodness gracious the OP is about choosing to invest in stocks or real estate

DetmerForever

7/23/19 10:40pm

Considering that I wasn't the only one who came to the conclusion that you were

CougBlu

7/23/19 10:49pm

A portfolio of rental homes with minimum cash down will win every time.

grandpacoug

7/24/19 3:41am

No, it won't. No data backs up the claim that diversified RE is better than a diversified portfolio.

memento

7/24/19 6:00am

I can only use my personal history and beginning with the 1970s and continuing

grandpacoug

7/24/19 8:28am

Glad we finally agree that historical data doesn't back that claim up.

memento

7/24/19 8:38am

correct and historical data doesn't refute the claim either.

HarlemCoug

7/24/19 10:08am

Yes it does.

memento

7/24/19 10:38am

I love that type of tenant. I had one that lived in a home of mine for 13 years.

grandpacoug

7/24/19 3:40am

Your math and conclusions are wrong.

PizzaPipeline

7/23/19 10:24pm

Plus you are paying down your loan and you get the financial benefits of depreciation...

HarlemCoug

7/23/19 10:26pm

Plus rolling your rents received into furthering leveraging the capital

molodyets

7/23/19 10:36pm

This this this. All those who argue against rentals often assume

CougaRR4L

7/24/19 12:13am

Most homes don't generate positive cash flow.

DetmerForever

7/23/19 10:30pm

I'm batting 1.000 on every rental property I've owned over 15 years.

mulletino

7/23/19 10:32pm

Yes, and some brilliant stock market investors beat the market every year

DetmerForever

7/23/19 10:37pm

I'm not brilliant. It's not rocket science.

mulletino

7/23/19 10:47pm

true and true

HarlemCoug

7/23/19 10:57pm

Thought I'd give you a softball tonight to give you some Didi Gregorius-like confidence.

mulletino

7/23/19 11:00pm

The problem is, what is average?

slatecoug

7/24/19 12:27am

wrong

HarlemCoug

7/23/19 10:33pm

Why would I rent out a place, if it wasn't generating positive cashflow?

7/23/19 10:35pm

People do it because they are betting on appreciation, or underestimate

DetmerForever

7/23/19 10:37pm

Only investors with no knowledge or experience would do it this way. Incorrect.

grandpacoug

7/24/19 3:45am

This is an uneducated response. I'm not saying you are uneducated

CougaRR4L

7/24/19 12:38am

I guess I wrote my post poorly because clearly it's being misunderstood

DetmerForever

7/24/19 1:01am

I have bought the median priced home well over 100 times in different states

grandpacoug

7/24/19 3:48am

“Your home is where you live, not an investment.”

garyfan

7/23/19 10:31pm

Residential real estate gain can be tax free, but I still agree with your

BDAWG

7/23/19 10:31pm

Residential real estate gains are taxable when you sell out.

DetmerForever

7/23/19 10:35pm

you defer the gains from the sale using a 1031 exchange. Other tax implications - a cash out refi is a tax free

HarlemCoug

7/23/19 10:40pm

All true of stocks as well.

DetmerForever

7/23/19 10:43pm

I don't think you understand what "all true" means. 1031s and depreciation are MAJOR tax advantages.

HarlemCoug

7/23/19 10:54pm

^^ i'm with this guy

BlueFrog

7/23/19 11:09pm

1031 or 250/500 2 year exemption. Get real...

BDAWG

7/24/19 12:40am

A 20k home in LA back in 1968 is basically 750k right now..

7/23/19 10:38pm

And $20K in the S&P 500 in $2.4 million - which do you think is better?

DetmerForever

7/23/19 10:41pm

Factor in rents at 40% net of gross...

7/23/19 10:44pm

Then factor in new properties bought with that rental income,

CougaRR4L

7/24/19 12:47am

Depends on how much you paid for rent along the way.

O Gaucho

7/23/19 10:44pm

You aren't making sense, at all. In your scenario, you automatically invested

byubyu

7/23/19 10:47pm

Also why would you assume you bought the house with 100% cash? That would be weird

7/23/19 10:53pm

I bought that house for $20,000 multiple times. Never paid a down payment larger

grandpacoug

7/24/19 3:52am

I have a couple explanations on my previous posts.

grandpacoug

7/24/19 1:33pm

this is my last post on the issue - it's completely faulty to try and use your analysis to prove that ave stock market

HarlemCoug

7/23/19 10:53pm

Since so many of you are asking about rental income

DetmerForever

7/23/19 10:53pm

So which stock should I buy tomorrow?

7/23/19 11:03pm

and not that it matters but the median home price in the US $285,700 - not sure where you got $168k

HarlemCoug

7/23/19 11:12pm

He explains that in his original post.

Blue Cat

7/24/19 12:02am

He obviously didn't read the original post

DetmerForever

7/24/19 12:12am

For the 20th time, you are making incorrect assumptions. The rate of return

grandpacoug

7/24/19 3:58am

I'm not sure he understands basic finance.

WDaddy

7/24/19 4:48am

Why did you delete your post?

cheezedawg

7/24/19 10:17am

I delete most of my posts after a day or two.

DetmerForever

7/24/19 10:42am

RE: I delete most of my posts after a day or two.

cheezedawg

7/24/19 10:46am

I'll give you a more completely honest answer, since you asked

DetmerForever

7/24/19 11:57am

You’re still missing the point.

garyfan

7/24/19 11:59am

He (or she) is actually not. As I mentioned before, Blackstone doesn't use a 20% IRR

memento

7/24/19 12:06pm

You’re talking RE funds, which also misses the point people have made repeatedly

garyfan

7/24/19 12:59pm

No I'm not. Blackstone buys residential RE. Thus their portfolio is the actual residential RE

memento

7/24/19 1:43pm

So are you saying the people on this board claiming to have otherwise are lying

garyfan

7/24/19 1:46pm

Sigh. I'm saying 20% as a return assumption is unreasonable. If I tell you the Equity markets earn 20% a

memento

7/24/19 1:53pm

I don’t think people have been unreasonable in explaining the upside involved,

garyfan

7/24/19 1:59pm

It has been a panacea for me. I repeat- Buy positive cash flow residential with

grandpacoug

7/24/19 2:14pm

Great, why haven't you invested a billion dollars in this strategy?

DetmerForever

7/24/19 2:29pm

This is a silly argument. Buying and managing a few investment properties is

Skeptical Optimist

7/24/19 2:34pm

THAT IS EXACTLY THE POINT!!!

DetmerForever

7/24/19 3:03pm

What’s the point of narrowing the analysis to investments of a billion dollars

garyfan

7/24/19 3:07pm

Because people look at historic performance of asset classes

DetmerForever

7/24/19 3:28pm

Would it have been better in 1968 to put money in the stock market or under a

DetmerForever

7/24/19 3:52pm

And you just zoomed past the point.

garyfan

7/24/19 4:31pm

Ok, then I don't understand the point of the original post. Why come here to

Skeptical Optimist

7/24/19 3:09pm

Yes, they are talking about a DIFFERENT investment strategy than the one

DetmerForever

7/24/19 2:32pm

Look, if what you are really trying to say here is treating your

CougaRR4L

7/24/19 3:27pm

It's not as complicated as you're making it

DetmerForever

7/24/19 8:56pm

It's a lot easier to buy and manage your own real estate portfolio than it is to

Skeptical Optimist

7/24/19 1:53pm

This is just fundamentally flawed thinking. This is like saying it's easier for you to find the next hot stock

memento

7/24/19 1:55pm

Not at all. It's only saying that being a successful real estate investor

Skeptical Optimist

7/24/19 2:35pm

Of course not, but the thought that your return assumptions should be

memento

7/24/19 2:52pm

This is the last thing I'll say about this topic. The issue isn't should or shouldn't RE be a part of

memento

7/24/19 2:00pm

Sorry, but my data does support the #'s. Leverage and compounding are great.

grandpacoug

7/24/19 2:17pm

Your data is not the market. I repeat. Your data is not the market. This is not difficult to understand

memento

7/24/19 2:32pm

Comparing the median home price in the 1960's to today is also not the market.

Skeptical Optimist

7/24/19 2:45pm

Thanks for putting words in my mouth. I didn't say that nor did I agree with that analysis.

memento

7/24/19 2:56pm

People make investment return assumptions based on their experience and history

Skeptical Optimist

7/24/19 3:13pm

I agree that everyone shouldn't expect to be able to do what I was able to do.

grandpacoug

7/24/19 3:59pm

Nobody said that it was easy to earn 20% on residential real estate.

Skeptical Optimist

7/24/19 12:17pm

Have you read the comments?

DetmerForever

7/24/19 2:30pm

I wish I could rec this more than once.

memento

7/24/19 2:33pm

I see people saying that they consistently achieve those returns. I don't see

Skeptical Optimist

7/24/19 2:43pm

I think we're talking past each other

DetmerForever

7/24/19 3:07pm

I need to take five minutes on checking weekly rental reports. I'm done on this

grandpacoug

7/24/19 4:02pm

Ok, fair enough, but that seems like a pretty meaningless comparison to make

Skeptical Optimist

7/24/19 4:09pm

I only wish you were right

DetmerForever

7/24/19 8:52pm

That was probably the crux of where the discussion derailed here.

CougaRR4L

7/24/19 11:10pm

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