Alternative real estate strategy

[Rich_in_CT]

Hell I know a guy that made a couple wise stock purchases and bought his house CASH with the money he made.  Some people do get rich with stocks, saying they don't is just rediculous.

[Bluemoon06]

Hell I know a guy that made a couple wise stock purchases and bought his house CASH with the money he made.  Some people do get rich with stocks, saying they don't is just rediculous.

Did he really?

[dd564]

One of the arguments here is that the people who made money with stocks did it by dollar cost averaging.

But if you're investing in real estate, your doing the same thing with your time.  Your averaging your time across the length of which you own the investment.  Also, you're dropping money in monthly payments.  So unless you buy all properties at once, your dollar cost averaging each time you make a real estate investment.

Why are you holding stocks to restrictions of saying "you can't do it without dollar cost averaging" which is a sound strategy.

That's like saying you can't make money on real estate if you have to buy all of the properties you will ever own on the same date.  It's a ridiculous argument.

[Steve9c1]

Hell I know a guy that made a couple wise stock purchases and bought his house CASH with the money he made.  Some people do get rich with stocks, saying they don't is just rediculous.

Did he really?

The real question is did YOU really just ask that???  Come on man. If there are people on this board who have multi-million dollar real estate portfolios, why on earth would you not think that there are other people out there with multi-million dollar stock portfolios. You have 800+ posts and you can't see that investing in RE is 90% the same principles as investing in anything else that can have value: stocks, businesses, vending machines, antiques, collector cars, whatever else you can think of. Different lingo, and a few different specialist(home inspectors as oppose to a good restoration mechanic in the case of collector cars), but you still network, need to find sellers, buyers and transfer something between them and make a profit for yourself. I'm not sure how else we can explain this to you that you can make money in more ways than you can dream of.

[Bluemoon06]

why on earth would you not think that there are other people out there with multi-million dollar stock portfolios.

Because I have asked the questions of the people in the industry.  The people with multimillion dollar stock portfolios have ALL got the money from other sources.  They don't get rich in stocks.  They get rich and then bring the money and put it in stocks.  That “did he really” comment is designed for him to ask the guy did he really make that money on "a wise stock investment."  If he did, what are the vast majority of the stock investments foolish stock investments.  The emperor has no clothes.

[Bluemoon06]

if you're investing in real estate, your doing the same thing with your time.  Your averaging your time across the length of which you own the investment.  Also, you're dropping money in monthly payments.  So unless you buy all properties at once, your dollar cost averaging each time you make a real estate investment.

That is not how I am making money in real estate.  I am buying properties with the profit already made.  I buy a property for $70k that is worth $100k.  I put $10k in it and I make $20k without making my first payment.  Real estate and stocks are apples and oranges.

The way you make money in stocks is to find a company whose stock is undervalued and buy it when it goes up you make money.  The stock market is too efficient for you to profit from that situation.  It gets factored into the stock price before you can take advantage of it.  What stocks are is a good place to park some money so that you keep pace with inflation.  You can’t get rich in the stock market unless you are in the business of selling stocks to people.

[NJREstudent]

You can’t get rich in the stock market unless you are in the business of selling stocks to people.

What am I, chopped liver?  I don't sell stocks.  I have made a LOT of money from stock/bond investing.  Again, if you are basing this on the people you have talked to in the industry, you have not talked to the right people. 

[Bluemoon06]

You can’t get rich in the stock market unless you are in the business of selling stocks to people.

What am I, chopped liver?  I don't sell stocks.  I have made a LOT of money from stock/bond investing.  Again, if you are basing this on the people you have talked to in the industry, you have not talked to the right people. 

I am sorry I don't think you are chopped liver, and I don’t want to insult you but I don’t believe you made lots of money in the stock market.  If you did...how did you do it?

[Rich_in_CT]

Hell I know a guy that made a couple wise stock purchases and bought his house CASH with the money he made.  Some people do get rich with stocks, saying they don't is just rediculous.

Did he really?

No, I'm bulls***ing you to get a rise out of you.  Yeah he really did.  Few grand worth of stock in Xerox and Fujifilm, I think this was in the 70's.  They kept going up and up, finally sold them years later and cashed in bigtime.

[NJREstudent]

You can’t get rich in the stock market unless you are in the business of selling stocks to people.

What am I, chopped liver?  I don't sell stocks.  I have made a LOT of money from stock/bond investing.  Again, if you are basing this on the people you have talked to in the industry, you have not talked to the right people. 

I am sorry I don't think you are chopped liver, and I don’t want to insult you but I don’t believe you made lots of money in the stock market.  If you did...how did you do it?

no offense taken.  Initially, I threw a dart at a dartboard.....kidding. 

I started trading on my own in college, well before online trading was in vogue.  I used Credit Card advances as my initial money.  And quickly made money by trading mostly equities, and sometimes options.  My inital strategy?  Buying undervalued stocks relative to their peers in a cyclical and/or growth business at the bottom of a cycle-- or conversely, I would short stocks at the top of a cycle.  Did tons of research-- 15-20 years ago, was a lot easier to make money in equities with a little   research.  After a successful track record, I gave up trying to time the market-- it's a fools game, and an individual investor WILL lose money to Wall Street big boys trying to do it.  Though, I do admit I made a ton of money during the internet boom.  I never really fell for the whole boom... sure, I made money, but knew that it wouldn't last.  I would walk to work from the subway and here construction working talking about what stock they bought.... and had no idea what the company did!  I knew that was the top. 

I change strategies every so often, but now I am in a very conservative mode... I don't like equities at all and essentially own an index and dissect it-- I short what I think will underperform and load up on what I think will outperform, but keep the same core stocks.  Making money in equities requires a rigid strategy-- you must develop one, or adopt someone else's that works.  I have said this before, but most people hold onto their losers way too long and don't let their winners run enough. 

[bdub]

this thread has been educational and amusing at the same time.

i'm reading, and i see myself acknowledging both "camps" if you will - but am clearly in the RE camp (duh, i'm here...)

i don't think you can get rich in the stock market, although some truly can.  just like some people can get rich in the NBA.  (stock market is a little easier than the nba).

most people cannot get rich in real estate.

most people cannot get rich - period.

it takes lots of work and information (or luck) to get rich.

if you have a system that works in stocks, you can get rich, but you have to work that system.  i certainly don't have one, and would just use $ cost averaging to build another set of assets (my 401k is my primary avenue for doing so, and it beats inflation and my internet savings, so that's decent).  i know some people who can make $40k a year working for a couple hours a day setting up trade triggers and reading/researching companies.  i guess they could make $400k or $4MM a year if they worked more (either more trades, or more research into better trades).  i do not have the expertise /  desire / stomach / cash to work the market like that.

if you have a system that works in RE, you can get rich, but you have to work that system.  there are several people on this forum that seem to have a system, and the system (but not the effort) itself seems pretty simple.  i think the work in RE may be a bit more leg work or busy work than in stocks, and possibly even more physical work, but the process is simple.

in theory, the two are the same.  buy undervalued assets and profit on the spread between current value and market value.

buy an undervalued stock, wait for it to reach market value, and either sell it or keep it and collect dividends.

buy an undervalued home, fix it up to market value, and either sell it or keep it and collect rents.

the main differences i see are:
stock:  i cannot control the valuations, and i don't have enough information to know an undervalued asset (company) or an asset on a down cycle, etc, and i have NO control over the value of that asset.

r.e.:  i can better recognize an undervalued asset (home) have more control of the value (ARV).

stock:  using leverage has a timing element that is unknown (eg, exercising an option, shorting a stock) because of the lack of control of the price.  there is a process to mitigate this, but i don't know enough about'em (covered options, tech analysis, ????)  the downside to leverage is loss of capital (margin call in a short) or non-performance (naked options)  the upside is unlimited.

r.e.:  leverage is fairly simple - an asset secures a loan.  the downside to being leveraged in r.e. is loss of any invested capital and the asset (foreclosure.)  the upside is unlimited.

so, the net of it, for me is that i have more control in the RE world than i do in the equity markets.  there are no day-to-day dramatic price shifts in RE like there are in equities.  the RE market is fairly rational, and when it isn't you can clearly see that it isn't.  to me, the stock market is very irrational - stock prices increase on bad news and decrease on good news.  again, i don't have enough information to be on either side in stocks, so i just buy and hold and hope i'm on the good side of cost averaging.

which is why i'm on REIClub.com far more than FOOL.com. :-D