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Real Estate vs. Mutual Funds

drlove

Ph.D. in Pussyology
Oct 14, 2001
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In your opinion, what is a better investment - buying property, i.e. land, a house, or channeling your money into mutual funds?? I.e. contributing to an RRSP. (assume you can only pick one, not both). Discuss.
 

papasmerf

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drlove said:
In your opinion, what is a better investment - buying property, i.e. land, a house, or channeling your money into mutual funds?? I.e. contributing to an RRSP. (assume you can only pick one, not both). Discuss.

Land will always appreciate and never fail you. But the growth is all about location.
 

Esco!

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This is a historic moment on TERB.

Drumroll please........

For the first time I actually completely agree with the Smerf.
 

lickrolaine

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Jun 29, 2003
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papasmerf said:
Land will always appreciate and never fail you. But the growth is all about location.
except in the late 80's and early 90's in Ont.
and when interest hit 20 percent.But other then that all is good
 

papasmerf

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lickrolaine said:
except in the late 80's and early 90's in Ont.
and when interest hit 20 percent.But other then that all is good
If you want a short term high yeild you should consider not buying land or bonds. You need to be in it for the long haul.
 

FOOTSNIFFER

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Stocks 'cause ur buying a growing cashflow.....

A business grows. When you own RE you're 'rent-seeking' and that's great, too but it's cyclical. There are often long periods of time when it goes nowhere; people forget that. Consider buying Exchange Traded Funds (ETFs)...they're like Mutual funds in that they diversify for you but are alot cheaper to hold. If you want a quick and dirty primer that's easy to read re: why stocks rock then get Stephen Foster's "Stop Working Now".
 

Yuri

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Aug 26, 2001
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Choice

drlove said:
In your opinion, what is a better investment - buying property, i.e. land, a house, or channeling your money into mutual funds?? I.e. contributing to an RRSP. Discuss.
Whatever is your choice, only advice I would suggest is that you avoid The Chartered Banks as your source for mutual funds. The Canadian Banking system is the biggest rip-off in the world.
If you chose Real Estate and use the Banks for Mortgage Funds, negotiate "Hard" for the best rate, remember they have no loyalty to you so why be loyal to any particular Canadian Bank, negotiate for your Best Rate on a Mortgage.
After spending 16 Yrs in the Banking system, I know how they operate.
Publically, they tell you that you are a valued Client, privately the Branch Banking System is designed to maximize as much Revenue from any given Account/ You are a number on the profit/loss ledger and that is all. If you do not provide a positive revenue stream, you are marginalized. That is a fact.
 

xarir

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Aug 20, 2001
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It depends on the timeframe. Generally though I'd say a good quality mutual fund will outperform real estate in the very long term.

A typical house in Toronto (GTA) in the early 1960s cost about $30,000. Today that same house might be say, $700,000 (if it's located downtown). That's a return of about 7.09% per year. A decent quality mutual fund on the other hand would have returned an average of at least 10% if not more over that same time period.

Now, 46 years is kinda long by normal standards so let's look at something a bit more realistic. Approximately 5 years ago I looked at a condo development in downtown Toronto where a suite would have cost about $280,000. I saw in the paper recently that the same / similar suite sold for $425,000. On the surface that looks good - $145K over 5 years. But it's a return of 8.70%. A decent quality mutual fund should have returned at least that if not more during the same time period.

Perception versus reality is an interesting thing. The ethos that surround real estate is valid because it's a physical asset and in general, real estate values do tend to increase over any time period. Mutual funds on the other hand fluctuate up & down on a daily basis. This fluctuation along with media stories of companies going wildly bankrupt or wildly wealthy in very short time periods lend credence to the perception that mutual funds are less solid than something like real estate. The thing to keep in mind is that a good quality mutual fund will generally average upwards over time and that it will do so at a greater rate than your average real estate investment.
 

xarir

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One other thing that's often overlooked - taxes. Real estate can sometimes benefit from a capital gains exemption but investment properties generally don't fall under this category. Mutual funds on the other hand can offer certain tax advantages depending on the nature of the fund itself.
 

Esco!

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xarir said:
Mutual funds on the other hand fluctuate up & down on a daily basis. This fluctuation along with media stories of companies going wildly bankrupt or wildly wealthy in very short time periods lend credence to the perception that mutual funds are less solid than something like real estate. The thing to keep in mind is that a good quality mutual fund will generally average upwards over time and that it will do so at a greater rate than your average real estate investment.
OMG........so which Mutual of Omaha location do you work at Xarir?? :rolleyes:

I'll keep my money in Real Estate, thank you very much.

But Xarir, if I need a Mutual Fund salesman, I'll be sure to PM you, cool???




BTW..........all I wanna add is that real estate is a fixed asset, something you
can literally hold in your hand.

This clown with his mutual assets is not something like that, if anything its a very liquid asset!!
 
FOOTSNIFFER said:
Consider buying Exchange Traded Funds (ETFs)...they're like Mutual funds in that they diversify for you but are alot cheaper to hold. If you want a quick and dirty primer that's easy to read re: why stocks rock then get Stephen Foster's "Stop Working Now".
http://www.chebucto.ns.ca/~rakerman/money/gm-The_ABCs_of_ETFs.html
www.iunits.com

As other mentioned, it depends how long you intend to invest. For real estate whether it's your primary residence or rental. Like those commericals, how much risks your willing to assume...

Disclaimer: I'm no Tom Vu with bikini girls on a Florida speedboat selling Power of sale real estate and no investment advisor. Past returns do not reflect future performance...etc. etc...
 

Esco!

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peelcowboy said:
I am just pissing myself laughing: XARIR and his magical 46 year Mutual Fund yielding 10% per year compounding with special tax advantages. Wow, what a whopper. Who sells this amazing fund; the pixies or the elves?

The crazy thing for me is people constantly buy into this rancid BS. I can't tell how many people think their Mutual Funds will "eventually deliver 10% rates "over the long haul" Lies, Lies and more Lies.

The Mutual Funds industry works from the same propaganda book as Goebbels and Karl Rove: if you tell a huge lie loud enough, repeat it often enough, beat down the people pointing out the truth effectively enough, in the end your huge lie will become accepted fact.

The truth is that the vast magority (I am talking over 85% here) of mutual funds with all their managers and analysts and computer programs cannot even beat the totally random rate of return of the total stock market index year in and year out. Yes, they can't even achieve a better rate of return than sheer random occurences over the coarse of the stock market's year.

The only people who make serious money in the Mutual Fund business are the people or banks who operate the mutual funds.

The story of Real Estate investing is too complicated to address here, there are lots of hidden issues in that field as well but please "most mutual funds will acheive an average of 10% returns over the long term" sir, hang your head in shame for endorsing the Big Lie.
Excellent post cowboy!!

The truth is that the vast majority of wealthy people have made their money in real estate.
Thats a fact!!
 

justajohn

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Jul 27, 2002
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Esco! said:
The truth is that the vast majority of wealthy people have made their money in real estate.
Thats a fact!!
And if it wasn't in real estate...it was selling mutual funds

Anyone selling you an investment promising you over a 7% return is talking through their hat. But as Goodtime pointed out, how much risk are you willing to take. Are your investments done to preserve capital and see a steady return or are you willing to take risk. If you are willing to take risk, how much knowledge do you have about what ever it is you want to invest in.
 

Esco!

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justajohn said:
And if it wasn't in real estate...it was selling mutual funds
LMAO.........:D

justajohn said:
Anyone selling you an investment promising you over a 7% return is talking through their hat
One of the best and shrewdest stock market speculator I've ever known once sat down when he retired and added up all his gains and losses over a 40 year period.
He concluded that even though he had some of the best inside information (some of it legal, some of it not), that over that 40 year period his net profit added up to about 10% annually.
And thats with the absolute best inside information!!
 

drlove

Ph.D. in Pussyology
Oct 14, 2001
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The doctor is in
For what it's worth, my investments have done extremely well, most notably energy and recovery. I happen to think my advisor is doing a great job.
 

Berlin

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Jan 31, 2003
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that over that 40 year period his net profit added up to about 10% annually.
10% from stocks, that's rather good over the course of that time frame, and he's one of the the lucky bunch.
 

21pro

Crotch Sniffer
Oct 22, 2003
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might I be the only one that talks real numbers? idunno, but that's what investments come down to...

my stock market portfolio has averaged about 39% per year since 2001, 10-year has always been an annual average of around 25%.... my 2005 returns were 24.3%...

a 10-year average return of 25% per year doubles itself every 2.9 years.

my real estate portfolio averages about 7% per year, but i've only been in real estate since 2000... i'm yet to get better at it and i don't see the returns that i've seen in '00,'01,'02,'03,and '04... in fact even in the hottest markets, RE prices in Ontario haven't done better than 6% in any city across ontario. RE investment experts are still expecting high returns but, builders are expecting prices to stagnate... but, then again what's high in RE... anything above 4% is considered high...

needless to say, i'm downsizing RE holdings now and am considering renting instead of ownership.

believe it or not, you can rent a $700,000 home in King or Caledon township on 2.9 acres for less than $2000/ month.

to buy that home with 25% down that would be an initial downpayment of $183,000 including all closing costs. the monthly mortgage payment if done over 25 years would be at 5.75% or about $3,817 including your property taxes (about $5,800 per year)

you can rent the same property for $2000... that's a monthly cash-flow savings of about $1,817.

now take that $1,817/month + the $183,000 and invest it in any of these top 10-year performing mutual funds on morningstar.com... just make sure it isn't overbalanced in energy stocks... or better, look to see that it's one that re-balances its focus every 5 years... typical bull markets last 5-8years... there are alot of mutual funds out there that perform 20% to 30% per year on average and are tax efficient...(look at the 10 year returns) and require $150,000 as an initial minumum investment. If you only make an average of 15% per year off of the mutual fund, that portfolio will swell large enough that you can purchase that same house for CASH in less than 8 years. something that otherwise with the exact same amount of cash flow needs would have taken 25 years to pay for on its own... but also, let's not forget that as the tenant, you are not responsible for any upkeep and maintenance for that property during that duration. landscaping and wear and tear on faucets, roofing, garage door opener, etc.. alone would add a few $1000 dollars of costs to the owner (ie, RE investor) as well in that same 8 years.

you see, much better than RE alone... but, really there are no limits to the amount of returns you can achieve.

some business owners laugh at my 25% annual average as they can get 300% annual returns through investing in their own business... so, therefore, to each, their own!

cheers!
 

Berlin

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I am indeed very happy for you to have great returns on your stocks portfo, first of all. Good for you, I say.

21pro said:
my real estate portfolio averages about 7% per year, but i've only been in real estate since 2000... i'm yet to get better at it and i don't see the returns that i've seen in '00,'01,'02,'03,and '04... in fact even in the hottest markets,

RE prices in Ontario haven't done better than 6% in any city across ontario.

What exactly do you consider as a real estate investment ? none better than 6 % ... are you talking about rental income from properties ?
 

Dead2Parrot

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Property! Let me say that again so there's no confusion: Screw mutual funds, buy property!
 
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