Real Estate vs. Mutual Funds

[Big Sleazy]

Normally I would say land but with property value assessment. Any gain is going to be harshly punished by our good friends at Queen's Park.

BS

 

[21pro]

Therefore 21PRO = Bill Gates, world's richest human

thank-you, but, nope. i started with $500 back in 1994.

One other question for 21PRO/Bill. If a 3 bedroom townhouse in Richmond Hill is renting for $1500.00 per month how exactly is a $700,000.00 Estate Home on 2.9 acres in King City renting for $1850.00 per month?

http://www.crworks.com/partner/properties/newfeaturen2.asp?targetprop=184689&id_Person=41717
this house was available last fall for $2000/mth... appraised at $749,000. not 2.9 acres, but 3/4 acres in luxurious Caledon East and next door property sold for over $1million.

21PRO, congratulations, by your own admission you are the greatest investment mind of the 20th century.

You must also be the worlds luckiest man as well as the smartest. Mind you, there is one other possibility.

hardly do you need to be lucky or smart... i just pick my own stocks and eliminate commissions as much as possible. 1) i don't trade.. average holding periods about 3-4 years... sometimes much longer... 2) i buy alot of stocks that allow for DRIPs or commission free purchases... 3) i never pay more than $10 for a stock, among about 25 other rules i follow.

PS.. Warren Buffett has been in the stock market for much of his life, over 50 years. There are many better investors in the shorter terms. and there is alot of evidence showing that private individual investors do alot better than the big-wigs...

 

[21pro]

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

no. i said properties appreciating at 6%.

my RE returns are a bit higher because of leverage and income generated from rentals and development.

 

[Esco!]

Thats all fine and dandy but I stand by what I said earlier, the vast majority of wealthy people have made it in Real Estate.

Thats not a stat I'm pullling out of my hat, thats a fact!!!!

 

[Berlin]

no. i said properties appreciating at 6%.

Let's look at the window from 2000 to present. I really don't know where in Ontario and what you have invested regarding RE. Don't take my words for it, have some of your RE people check out the prices of , say , a detached 2 story , in the area N of Eglinton and Keele. Appreciation is a few times more than 6 %, per annum.

 

[21pro]

sure... that's what they say...

and i wasn't talking 2000 to present... i did very well then.. but 6% going forward will be difficult. and nowhere near what stocks averaged over the last 80 years...

but i dare ya to compare sales records of this year to last over a broad market... 6% is hard to find without sinking in renovation improvement costs...

 

[Berlin]

sure... that's what they say......

... read my post again . the last 2 sentences.

and i wasn't talking 2000 to present... i did very well then.

I used the 2000 to present window because of your quote below, the part in bold

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...

I am not here to diss your numbers and claims in general . But you could have done better with your RE investment since 2000, especially if you have bought properties in 1999 or 2000. Not just 7 %.

 

[Misanthrope]

Thats all fine and dandy but I stand by what I said earlier, the vast majority of wealthy people have made it in Real Estate.

Thats not a stat I'm pullling out of my hat, thats a fact!!!!

Then you should have no trouble providing a citation. I doubt it.

 

[21pro]

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

not true.

no stats to prove this. only Rich Dad/Poor Dad would make such a false claim.

it would be true that the vast majority of wealthy people hold their net worth in real estate, but have made it elsewhere.

Business ownership is by far the greatest creator of wealth.

 

[21pro]

I am not here to diss your numbers and claims in general . But you could have done better with your RE investment since 2000, especially if you have bought properties in 1999 or 2000. Not just 7 %.

i agree. i was an amateur, newbie, if you will, in 2000 when i bought my 1st property. in fact i made alot of mistakes in the short period investing in RE and still made money... however, RE doesn't compete with stocks on an ownership vs. ownership performance level. and just as you can pick bad stocks, you can pick bad RE deals also...

 

[xarir]

... 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.

Perhaps you should read my post before posting your comments. I actually said "good quality mutual funds" and never made reference to any old mutual fund. I suggest you quote more carefully before letting your accusations fly.

For the record, I agree that the majority of funds will not outperform the index. Some funds however will. These good quality funds are the ones people should focus on, if they so choose to invest via funds.

The comments in this thread show that people should try to seek professional advice when making investment decisions. Listening to sensational claims that are not backed by fact is a sure-fire way of not maximizing your potential return, and in the worst-case of losing everything. I'm not saying to mindlessly follow whatever is recommended to you - you have to maintain your own sensibilities. But just as you wouldn't go to your non-medical buddy to have an operation done, you shouldn't go to your non-investment-professional buddy to seek investment advice.

 

[thats all]

21PRO, thanks for posting your comments/experiences. Great read.

 

[Esco!]

Then you should have no trouble providing a citation. I doubt it.

Indeed I can, here's a San Francisco Chronicle article.

I quote:

Lereah makes his case for why the real estate market will remain the best way for the majority of Americans to build wealth.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/03/12/REGHHHM7N11.DTL&hw=lereah&sn=001&sc=1000

I agree that many people get rich from business enterprises but you neglect to calculate a person's capital gain on house appreciation and Real estate transfers (from parents to children when they die).

Add that into the equation and real estate is by far Numero Uno

 

[21pro]

Lereah's article is a poor one at best. incredibly biased and doesn't contain the real returns on RE as an investment... no talk about how expensive a house can be over the long term... in fact, he doesn't compare it to any other type of investment.

and he is meaning owning a house as principle residence as the only means of an investment... that perhaps is the most overpriced and worst performing sector in RE...

The only way to build wealth, for 80 percent of Americans, is real estate.

no basis for this stat. and it is wrong, wrong, wrong...

 

[Paladin]

Greater Potential for Large Gains from Mutual Funds

If you look at the gains experienced by some mutual funds within the past 12 months, there is more potential for large gains by investing in mutual funds. For example, the precious metal mutual fuds offered by Canadian institutions have gained between 46 and 100% in the past 12 months. The one month gains have been between 11 and 21%. I have not seen any real estate investments in the GTA that have increased in value that much in a year.

 

[Esco!]

21pro, I'm not gonna argue with you, you go with your mutual funds and I'll stick to my real estate

 

[21pro]

i'm just speaking on behalf of personal experience in both markets... maybe i'm just better at the stock market, idunno... but, i do like the fact that i don't have to unplug any toilets for my shares in franklin-covey or air france...

what kind of RE do you partake in Esco!?

 

[Fortunato]

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.

That's kind of a silly question... it's like asking what is better, government bonds or joint accounts (which may or may not include government bonds)?

Real estate is an asset class (just like equities, bonds, etc.) and has fairly distinct risk and return characteristics. Each asset class has it's place in a properly diversified portfolio, based on investor risk profile and preferences. Small real estate portfolios will suffer, however, because of the size of investment typically required, investors will likely be subject to a multitude of unique risks (things ranging from illiquidity, to the risk of having bike gangs moving in next door, etc.) that larger portfolios can reduce through diversification (i.e. holding a variety of properties with different characteristics).

Mutual funds, on the other hand, are a mechanism of investing collectively in one or many of those asset classes, and can include just about anything in the investment world as their underlying assets (including real estate). I personally don't much care for them (I find their fees way too high for the supposed "value" they deliver, especially in Canada), and would suggest that if you can afford to properly diversify your investments without them, you're better off. If you simply don't have the capital to do that, you can use mutual funds (including REITs), but be VIGILANT with your research - especially in the areas of cost - and keep an open mind to new products that can deliver much of the same things with lower fees (e.g. exchange traded funds).


Best regards,

F.

 

[Esco!]

what kind of RE do you partake in Esco!?

I have some investments in duplex apartments and small strip plazas.

 

[goodtime]

American wealthiest

Thats all fine and dandy but I stand by what I said earlier, the vast majority of wealthy people have made it in Real Estate.

Thats not a stat I'm pullling out of my hat, thats a fact!!!!

Actually, neither.

At least American wealthiest, most accumlate their wealth thru hardwork.
Summary, http://www.harrisongroupinc.com/index.php?q=node/30
Another perspective, http://www.harrisongroupinc.com/index.php?q=node/32&PHPSESSID=4168473561a0582645d78af479f75aca
Detail profile, http://www.harrisongroupinc.com/index.php?q=node/44