Is it Time to put stock market money into real estate?
To say the recent stock market has been volatile is a gross understatement. If you are like me you are looking to take money out of this volatile environment and put it to work for you in real estate.
In the video series I did a few years back (click here for Gregg Fous Real Estate Investing Series) I review many of the things that I have learned about real estate investing from when I started buying property in Ohio, and then later on here in Florida. I think many of you will find it helpful – from large investors to small.
In the fourth of the series (Click here for Gregg’s Real Estate Investing Video part four) I speak of Alternatives. Today I want to talk to you about real estate as an alternative investment to stocks and bonds. A good agent can show you how to get attractive returns with manageable risk.
In my video I talk about alternatives within real estate. Once you as an investor make the decision to buy a certain property, you have crossed a line. You have decided to SPEND. What I always suggest is now that you have decided to commit the $50,000, or whatever the sum is, you need to examine all the other ways that you can place that same amount of money and get it to work for you. Always have alternatives.
For example: you have decided to buy a duplex as a rental property. You and your agent have done the math, you know what improvements are needed, and you like the price. Get your agent to summarize all the criteria that you find attractive and look for other opportunities that compete with it. And by the way, just down look on paper – go SEE the competitive offerings. This process will wither solidify your decision or move you away from it.
You need to look at the two basic ways to make money in real estate.
1. The Capitilization rate ( CAP Rate) (To dive into CAP Rates read this article)
2. The Internal Rate of Return (IRR) (Here is an explanation n detail on IRR)
I prepare a rather simple report that is easy to understand and will help you as a buyer, make an informed decision. To download a one a recently did on Fourplex, click here. I highly suggest you download this and review it.. I can do this for you as well.
But what about alternatives outside of Real Estate? Sure, real estate should be part of any investment portfolio. Me? I prefer real estate over the stock market, bonds or mutual funds. But I have money in them all. My expertise is in real estate. There is more I can control in real estate. This past few week the stock market took a few nose dives when was I was busy doing something else. What happened was totally out of my control. Yeah the jobs report popped it up again Friday...but what's to come this week?
There has been a lot of discussion over the past few years with this real estate bubble about how safe and perhaps preferable the stock market is to real estate. Not for me.
Here are some reasons why.
1. I can leverage the money I put into real estate.
2. I can physically improve my real estate.
3. I can visit, see, smell and touch my real estate.
4. I can make money with income, appreciation, and tax deductions on real estate.
5. I can increase rents and income and refinance my real estate.
6. My rental property makes money for me while I sleep.
7. Real estate has a kind of forced discipline. I have a mortgage payment I need to make it every month; no one is forcing me to put in so much every month into the stock market.
8. It gives me joy.
9. I have control.
10. They are not making any more of it..
It probably won’t surprise you to know that the money I do have the market is with REITs, Banks, and housing related businesses – because this is what I understand.
I like to stick with what I know.