We are upper middle class. My wife has been asking me if we should look into real estate. I explained to her that I don't even like maintaining my own personal house what makes her think I would enjoy real estate. She tells me I could hire a property manager. I told her I don't even like paying for a financial advisor, what makes her think I want to pay someone to coordinate my rental issues. Call me lazy and inefficient, but living a simple life with less decisions and issues in life is my goal. I am happy with "average" market returns. I'm 46 years old, but people tell me I look 33---that is by design.
100%. Real estate can work for people who are experienced with it, and can invest the time that it takes to manage properties and tenants. It’s not for 99% of retirees.
Agree. I have had Real Estate for decades and it is a lot of work for mediocre-to-average returns, and a manager makes it WORSE not better. A manager costs plenty and a manager doesn't care how much it costs to fix a water heater or a blocked drain.
I don’t want the hassle factor renting out properties. I’m all index funds worth over 1 million. I don’t have to evict anyone, or deal with property upkeep. I do whatever I want to.
I have both. 850k real estate / 800k index funds (retirement accounts). Feel balanced. No debt. 43years old. Would like to retire at 58ish. Still working. Invest about $5000 a month in the market.
I did both. I view real-estate as a job, not a "pure" investment. If you have a real estate job, you should also be saving in traditional vehicles such as index funds.
Rental real estate is not passive. You need time for tenants to pay down your mortgage and build your equity. You need reserve capital for repairs and vacancies. One squatter will ruin your returns for years. Rent control will continue to increase across the country and hurt your returns as the city mandated limits won’t meet the increases in taxes and inflation on everything from utilities to goods for repair. You have to be in it for a long time to reap the benefits for the typical investor. Most rental real estate investors try to get out as they get older because of the headaches. Index fund investors do not.
Realestate has been a fun ride! Sometimes you laugh somethings you scream.. Sometimes your a plumber, electrician, Lawyer and english teacher. All in all after 30 years it made me wealthy and I've been happy to sell off most all of it except for 3 buildings. Trying to get my teens to manage the last few.. If your new to realestate it's alot of work! I was 22 and bought my 1st 2 family best move ever..owner occupied best 5% I ever spent. I'm in my early 50s life is pretty good. Yes I invested in Roth iras 401k and cash stock accounts. Kinda terriable I pay more in tax then I ever did in my paycheck days
I despise real estate investing; I was in it with four properties. You have to deal with losers who don’t pay rent and/or damage the place. If I would stuck with my strengths, picking stocks and ETFs, our net worth would be in the low eight digits instead of high seven digits. My motto has evolved into “if you can’t jettison a bad investment with the click of a mouse, it’s not worth it”. I’m almost at eight digits, but I’m still irritated at losers damaging our properties or not paying rent. Real estate investing just sucked for us.
In SPY, top 5 holdings, MSFT 7.16%, AAPL 6.3%, NVDA 4.54%, AMZN 3.71%, META 2.52% total: 24.23% is that more or less than you thought? If you want passive income from real estate maybe consider a REIT?
2 things that Azul misses on real estate: leverage and inflation beating investment. Put 20% down and you can leverage the other80%. The return on investment can easily be 15% per year all while tenants pay down your mortgage. Tax advantages, depreciation, and then yearly appreciation on the full value of the property. In retirement and a few paid off mortgages you have a monthly rent continually coming in and you don’t drain your nest egg like index funds would in retirement. Inflation beating investment because you raise the rents to meet inflation
that's not what the fax reveal. you realize home equity does nothing to counter inflation, so that is contrary to your inflation beating investment. if equity is leverage that same leverage applies if it's in investments. your 15% ROI is wrong, given that real estate historically is short of 4%. That is barely beating inflation.
Han-your facts are incorrect. We are obviously talking about owning real estate investments not your own home. Rents rising stay up with inflation let alone appreciation. Leverage however is where the power lays. There are few investments that allow you to leverage and control an asset as effective as real estate. Azul is correct when he explains that well run investment properties are not passive-but also not as active as running a business. Even if you buy high-it is time and sticking with it where you build wealth monthly in real estate. It is not usually a get rich quick process.
I live off 1/6 to 2/3 the investment returns each year and the nest egg has never been drawn down. I own 0 real estate and never would. I retired at 48 without ever buying a house. It can be done.
*To be successful in markets, traders should understand the crossover between asset classes & liquidity flow. Tracy Britt Cool Finance focuses on Multi-asset trading, a single strategy to manage risk, profit, and the code or the actual decision-making across multi-asset classes. Her skills set is top notch.*
Investing has proven to be an incredibly beneficial decision. My cryptocurrency profits continue to play a substantial role in growing my overall wealth, reducing my reliance on my salary...
Not gonna lie. Ive bought my house 240k 7 years ago. I could sell it tomorrow for 550k .. It didnt cost me 240k to make 310k, it cost me 12k to endorse that 240k dept.. Its my best investment by far
Buying "your" house shouldn't be considered an investment. Actually, it's more of an expense than anything. Maybe you can pass it on after you die...or maybe you could downsize, but your 310k gain is mostly useless.
Thank you for sharing. Financial education is crucial today to show incredible resilience and discipline in the volatile market, masterfully balancing strategy and insight for success. This dedication to continuous learning is inspiring...managed to grow a nest egg of around 2.1BTC to a decent 15B TC in the space of a few weeks... I'm especially grateful to Linda Wilburn, whose deep expertise and traditional trading acumen have been invaluable in this challenging, ever-evolving financial landscape..
The same high-yield potential exists in both bullish and bearish situations; what matters is how information and technique are used. Not neglecting professional advice.
I own 160+ doors of residential commercial rentals @ age of 50 (7 years into the game) in pro-business state. Only buy property with cash flow from day one or potentially value-add. Property management taking care of all the “headaches” and staff turnover over. They deal with helping tenants apply COVID relief fund during the pandemic. Not even sweating during COVID time. If they don’t pay, we will evict them. I like to be in driver seat of my inventment rather than getting a ride from the stock market (up or down) Not to mention “depreciation” write offs! Property appreciation is just icing on top of the cake. Not my bread and butter!
Rental real estate comes with hassle across the board, unless you throw a lot of the profit to a management company (and then you have to manage the management company). I'm the administrator of our family's apartment building in an affluent NYC suburb and it's a never-ending pain. I'm no whiz, basically self-taught, and I fantasize all the time about selling and living in ease and luxury (approx. $4M+ value, no mortgage, purchased by my husband many decades ago) - but the adult kids don't want to sell. I'll be retiring from the pain in the butt job in several years. The monthly income is the huge positive, particularly since we don't have pensions.
Insightful comparison! Both avenues offer unique benefits. Understanding the differences is key for financial planning. Thanks for shedding light on this topic!
My 2 cents... I tend to be a bit biased towards real estate investing. What draws me towards rental income is.... similar returns as the stock market + low volatility like bonds... so rental income has a theoretically higher safe withdrawal rate (IE... the 4% rule changes to more like a "5%-6%" rule... when you compound both good returns + low volatility)... though I do agree you can't really call it passive income. I think it's a better asset than stocks and bonds (meaning, it's safe to rely on rental income to cover your bills), but there definitely is some active management involved.
Yup, I've been investing in real estate for about 45 years and have done well. Granted it's not a good news/bad news type of thing but normal everyday news/bad news investment. However, the bad days are very few compared to the overall gain. I'm in the process of paying off two properties and then rolling them into a fourplex in another, close by state with lower property values and pay cash for it; that will double my income without having a mortgage. Additionally, I'm looking at a lot for a duplex in the same city to build myself. Real estate is exciting and tiring at the same time. I use a property manager, which makes things easier...didn't always. Still, I would do it all again and try to not make some of the dumb decisions I did make.
My wife and I are multi-millionaires by sticking our money in the stock market. We do own our primary CA residence free and clear but we don't own any other real estate properties. We are in our early 50s now but have been millionaires since our early 40s. I think either real estate or the stock market will make you wealthy. You bring up all great pros and cons in this video. I still think I would've done the same thing (ie invest mostly in stock market) just because you can start early with not a whole lot of money, and I can manage it passively (vs real estate).
Good info thank you. Best thing is diversify in both index funds and real estate If you invest in real estate get a good management company that's a given that's how you make it passive
I've got money in Index Funds and Real Estate...eggs and baskets comes to mind. Do both if you can. Had a 42% return on my real estate investment since December 2020.
I rather save my time and effort. So i advocate stocks, bonds, index funds and ETFs. Obviously as he mentions, don't be over diversified. For real estate investment,as from the passive investment perspective, i keeps low cost REIT etf and invest in ground floor
You waffled a bit on comparing real estate leverage and stock market leverage. They aren't the same. Assuming you have a longer term loan on the real estate...and you should, then market price fluctuations aren't that big of a deal. As long as rents hold and your cash flow positive. I bought 10 rentals between 2004 and 2009. I couldn't sell them or refinance them for many years, but finding tenants was never an issue.
Thank you for another great video. It is awesome to see your subscriber #'s climb! I invest in RE, Funds, abd individual stocks mostly in my IRA's to defer the capital gains taxes. The depreciation benefit from RE is a big deal. It is one of the 4 quadrants where the real money is made in RE. RE is definitley.not passive, buy effort matters, and if someone is part of the massive group that is not prepared for retirem ent, RE can save you, but you get get off the couch and stay there until the props are stable. I have found it very satisfying and can tinker for another 30 years. Its not for everyone,but if you are handy at all, could be worth a try. May also help you enjoy the youth of your senior years while you "get the house in order" . Thanks Azul and pleae keep these videos coming! Luv ya
I just got rid of one after 12 years... bet you can guess wich one hahahaha.... rentals are miserable most of the time.... so much rather make my money truely passive!!!!!!
Also want to add I would be so much further ahead just investing into market😂... and yes I owned enough properties befor anyone says you have to have several... I owned 3 apartment buildings and 9 single family homes and a quadplex.... if your a good landlord you get screwed, no way around it people suck!!! 😅
Major indexes booked their worst yearly performance since 2008 thanks to drivers like the recession, war, hiked interest rate and inflation which so far doesn’t seem to be easing off, so I’m left wondering what 2023 has in store for us investors, I’ve been sitting on over $745K equity from a home sale and I’m not sure where to go from here, is it a good time to buy or do I wait?
I think stocks will plummet further before actually experiencing steady growth and there are still quite a few stocks that makes for a good buy this season, you just have to do your research, but to be on the safer side and not second guess your market decisions, I’d suggest you reach out to a proper investment adviser for guidance, they’re better equipped at understanding market patterns/movements and adjusting portfolio to match up with these market trends.
The decision on when to pick an advisor is a very personal one. I take guidance from ‘ Natalie Noel burns ‘ to meet my growth goals and avoid mistakes, she's well-qualified and her page can be easily found on the net.
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Why do so many argue equities VS. real estate? Or, gold VS. bitcoin? How about the word "AND"? Putting all your eggs in any basket is really risky. When something is undervalued, scoop it up!
My wife and I are good examples of Azul's comments that an average intelligent person can build wealth in Real Estate comparable to Physicians and other highly intelligent folks. We have a net worth of around $8M mostly built from RE rentals, but now have about half in funds. We are a members of a pretty swank yacht club where practically all the other members are physicians, scientists, and other incredibly smart people that have significant wealth mostly derived from their occupations. We know we're at the lower end of the spectrum with the other members. Not counting appreciation, over the long-term I would say out return in RE is about 3-4% better than ETFs, but with a lot more work. Appreciation in the markets we have been fortunate to be in on average over the long-term have been about 10% per year. I don't believe it is anymore risky.
I’ve been in the commercial real estate industry for 20 years. Mom and pop landlords vastly underestimate the true cost or rental property…transaction costs, repairs, vacancies and tenant lawsuit risk plus the labor cost of their own time. When these are honestly factored in to the equation they are far better off investing in passive index funds especially in tax advantaged Roth accounts.
Same, as simple as just keeping our first home which is a 2 unit. Then 401K, savings, invest. A quick 35 years later and all is well and nicely diversified.
Am slowly exiting real estate. Leaning more towards index funds as I look to enjoy my youthful senior years! Index funds dont call you to fix clog drains with hair.
I have money in real estate that I could have never been able to save and invest on my own. And the renters paid for it But it’s not for everyone, it is work and babysitting
If your rents cover your notes and expenses, then your only expense is the original down payment. This means that the rental properties must be bought at undervalued prices to keep the loan payments low. No exceptions! I spent 15 years buying, renting, and selling inexpensive properties, and I had plenty of heartache along the way. When all the debt was paid off, I sold all of them and bought 5 first class homes for cash. I use a property manager and enjoy my rents without too many problems because these houses are in better shape and better neighborhoods. I also own an equivalent amount of stocks and bonds. The 15 years were stressful and tough, though.
I have been reading a lot of comments and they have been making me a bit worried. I only have one rental but it is not an inexpensive property and the rent is pretty high for the area. I'm hoping I wont have a horror story like many people have with renters. Your comment gives me hope. I plan to retire in this house once it is paid off so I wanted to get a house in a nice area.
An asset pays me to own it, a liability cost me money to own it. I can't get past the "Cost of Ownership in taxes insurance maintenance & mortgage cost to own real estate, real estate is a liability, not an asset.
How about do both? If you are willing to maybe get rid of your preconceived notions, real estate is really the best way to go. But, I’m currently doing both and am living the life.
It's easy to beat the s&p 500 just take more risk, ether more market risk by using a bit of leverage or other risks like buying small cap value. In the long term that beats it BUT with higher volatility. There's so much risk capacity and tolerance we have though.
I agree. I do 50% small cap value. Not looking to sell. Just build wealth. Plan on working another 15 years. I have no debt so I am able to take on more risk for a premium.
@@captainmo3064 i do 80% FTSE all world and 20% small cap Value weighted in US and Europe (meaning it has only value and blend but not growth). I don't want to be as aggressive as you. Consider having as much Global diversification as possible though it reduces risk without reducing expected returns. Only reason my small cap is not globally diversified is I can't find a fund based in Europe with small cap value that is global. And funds based in Europe have 0% capital gains in my country.
@@ΙΩΑΝΝΗΣ-ΠΑΥΛΟΣΚΩΝΣΤΑΝΤΑΚΑΤΟΣ understood. I basically do S&P 500 / Small Cap Value. With Vanguard I can get these easily with low fees. History shows about a 10.5-12.5% return over 100 years. I am fine with that. Again with zero debt and 300k in income I can be aggressive right now. Will continue to buy and hold. Will need to draw down when income stops.
I own commercial RE. It is not entirely passive and I have a manager. Be prepared for everything which includes writing large checks, paying lawyers, and staying on top of local politics. My portfolio is far easier to manage. I use dividend reinvesting as a sure fire way of dollar cost averaging . Quarterly phone calls with my advisors help steer decisions but I manage the majority of the holdings. Nothing is “one size fits most “ in any arena.
I think the actual formula is 100% of depreciation is recaptured and that portion is taxed at 25%. The balance of the gain is taxed as a regular long term capital gain.
Being a landlord is a hassel. My index fund never called me in the middle of the night wanting me to come fix the furnace. I certainly don't want to clean the inside of the house nearly every year when the tennant moves out. My index funds never said I'm not paying you, and I'm NOT moving out. I'm comfortable riding the ups and downs of the markets. I'm invested in my home, and that's enough for me.
As someone who had 3 rentals at the same time, I can say that I'll never invest in real estate again. Index funds are so much less stressful and also not like having a full-time second job. Passive income my a$$
Like always, great video. I think index investing is good if you are on the accumulation phase. Sure, at some point you need to switch to great companies that pay dividends, so you have certain income coming in. I understand why bonds play a role (preservation of capital), but if not done right, they can make you lose purchasing power. Bonds are good today because interest are high, but that has not been the case for a long time.
It's about lifestyle and personal competitive advantage. A person with a HS degree can buy real estate, work very hard, and build a very nice portfolio of real estate holdings and make a lot of money over a decade or so. A person who went to college and obtained a STEM degree has a competitive advantage to get a good paying job that is out of reach for the HS graduate. However, you trade time for money in this situation. Well, the STEM person can easily invest in index funds for 30 years and retire quite comfortably while working a job that doesn't require too many weekends working or, let you said, getting up in the middle of the night to attend to a property emergency.
How about the middle of the road. Investing with a syndicator. They are doing all of the active work with finding the deals and managing the property but I get to invest in a larger deal combined with other people and get the real estate advantage.
Diversifying across asset classes is also worthwhile (not just diversifying within a stock portfolio). So I have a mix of low fee funds and index funds (and a tiny bit of money in trading accounts to stop me getting bored), plus some investment real estate that is professionally managed for 3% of the gross rent. My overall 'portfolio' takes about 30 mins each month to update my spreadsheets re NW, rental property expenses (for when I do my annual tax return), And I spend a weekend once a year doing my annual taxes. Considering my NW is around A$4MM it is all fairly 'passive'. Having both equities and real estate in my 'portfolio' (plus a few % bullion) helps improve the risk adjusted performance (ie. get decent average ROI with less volatility - so a real estate bust or stock market crash has less overall impact on my NW and doesn't cause any angst).
The correct answer is BOTH. Even if you stay 100% in the stool I market, just get reits and problem solved. Now if your net worth is higher or you want to settle down in a house where you want to live in for at least 10 years then buy a house or duplex.
I read this story where buying a California house back in the 1970's for $75,000 and is now worth $1,200,000 million That same amount $75,000 amount invested in a mutual fund would potentially be $9,000,000! That is hard for me to believe.
It’s probably truish. The $75,000 with dividends reinvested over 50+ years in the S&P. Sure. $9m The real estate would be much more for a couple of reasons. 1. Leverage. You would have put 20-25% down on investment property. In the 70s if I remember right you could certainly break even initially. If you reinvested the future years rent which was increasing where now you are getting $4500/month for that property. My experience investing about equal after the Great Recession (2008/9) is that California real estate has done about double what the market has. I haven’t run the numbers but I didn’t reinvest my rents and it still has. Leverage
It all depends on the particular real estate (but not as much as which particular stock you buy). Over the past 30 years Australian real estate (housing - houses and apartments) has averaged around 5%-6%pa compound total return. The exact return depends on which capital city you look at. In comparison the Australian stock market (All Ords Accumulation Index) has been 9.2%pa. It also depends on gearing -- I had bad experience with gearing (margin loans) in the stock market during the 2008 GFC, which reduced my stock market investment performance, but gearing is easy (higher LVR allowed) with real estate, and the interest rate charged a lot lower (about 2.5% above the overnight cash rate). So performance of a property investment with 20% deposit has been similar to an ungeared index fund investment. Having both in my overall portfolio gives extra diversification benefit (aka 'free lunch') -- reduced volatility (risk) with similar portfolio performance as being 100% in either stocks or real estate. The tax deduction for interest on an investment property loan also help with income tax strategy. Overall, I'm happy with a total after-tax return of around 6%-8% (real return of around 3.5%-5.5%) pa, and fairly 'passive' portfolio.
The premise behind broad based non-actively managed index funds is you are in it for the long term, so i'm not understanding the 3-5 yr down market and being harder in practice to manage index porfolio. Investing at any risk has the human emotional element to it, that has nothing to do with the basic premise of passive index fund investing. I'm surprised you put out unfounded comparison like 80% of startups fail, but you wouldn't say 80% of real estate investors fail. I wonder how you came to that conclusion? real estate investing is a business and should have the same failure rates as any other small business. In fact, if you look at the stats, over 90% of real estate investors fail. There is very low bar (e.g. $1) to investing "in the market" vs investing in real estate, so I also don't understand your comment that you think a greater group of people can succeed in real estate investing based on operational ease when the entry bar is high (even with leverage) and the stats showing the high failure rate. It seems to me that it is the misguided assumption of operational ease in real estate investing which leads to the high failure rate. The only individual stocks I would ever buy are stocks that I actually regularly consume the products and services., not matter if an advisor has a hot stock tip. I'm literally paying myself then. This wasn't your best video, probably one of the worst ones. I just didn't understand some of your arguments.
How to take a simple analysis and overcomplicate it and then conclude…it depends on what your objectives are - the entire analysis included exactly zero real life illustrations - just a dude’s opinions.
About the investing part. People, try your best to minimize your emotions. Consistently invest in an s&p 500 index fund and don't stop. Yes, there may be other parts of the market that are doing better here and there, but what do you care? You have a plan, and when you have a plan you stick to it. Don't overthink things.
Investors have just turned back the clock on the Fed’s tightening campaign and cast aside the Fed fears that ruled them for 15 months, It just gets very daunting to me when I’m sitting there looking at charts and trying to determine if i’m right or wrong! I’ve been trying to grow my portfolio of $300K for sometime now, I would greatly appreciate any suggestions..
First of all, You could lose it all and you could win it all. It goes both ways. Secondly, what works for A may not necessarily work for B and you should not be a bandwagon investor. A good number of folks are raking in huge 6 figure gains in this downtrend, but such strategies are mostly successfully executed by folks with in depth market knowledge
It’s unfortunate most people don’t have such information, I don’t really blame people who panic cos lack of information can be a big hurdle. I’ve been making more than $25k passively by just investing through an advisor, and I don’t have to do much work. It doesn’t matter if the economy is crashing, great CFA will always make good returns.
this is inspiring! could you be kind enough with details of your advisor please? highly suspect i'm much too small game lately to handle investing myself, figured out its best to consult a license professional at this point.
ashley airagahi is the licensed coach I use. Just research the name. You'd find necessary details to work with a correspondence to set up an appointment
I appreciate it. After searching her name online and reviewing her credentials, I'm quite impressed. I've contacted her as I could use all the help I can get.
I have all my money in three ETFs. IWF, IWD and IEFA. Large Cap growth, large cap value and foreign investments. They all outperform the market. Small caps are a gamble. I had money in other ETFs that weren't performing that well and I sold them and consolidated them into the three I'm holding now. If those stop performing well I'll find another index or ETF that gets better gains. The more you move money around the more you lose.
I am almost at retirement (2years). I have been investing in the SP index fund since 2000. If you’re young and are working, you have all the time in the world to get through the bumps of a down market. And the average time of a down market is less than 3 years. Stay the course.
@@Cenlalowell right, given the history of the s&p they werent really relevant to past performance of the fund, which most active managed funds fail to beat, so its not really an average fund.
@@Cenlalowell he also said as a con that the s&p was weighted toward the top handful of the biggest companies, do you really want all your money in just a few stocks? Well based on the performance of the fund for the last 60 + years....yes!
Colorado real estate market is just crazy literally doubling last 10 years. Yes, not all the renters pay but eventually your son will graduate and get a job 🤣🤣
Same goal as 90% of fund managers who never do. Keep investing simple and inexpensively and by equally weighted S&P500 index fund. Dollar cost average consistently and in as large amounts as you can, then go to the beach ad/or mountains and enjoy life.
Azul, I know you are getting on in years but why have you not covered Bitcoin as an investment? I have made more money with bitcoin in my portfolio over the last 5 years than I made in my entire working career. You're doing your viewers a disservice by not recommending at least a small exposure to this asset class. Isn't it part of fiduciary duty to recommend that which benefits the client and not yourself? At this point, it's almost negligent to not invest 1-5% into BTC.
