Would You Invest 100k In A Rental Property Or A Portfolio Of Dividend Stocks. You Can Earn About 6-10% A Year On Either?

[burt]

Appears to me that possessing a dividend portfolio is going to yeild about the very same as a peice of rental property of the exact same worth with significantly less headache. I have been brainstorming this thought for a even though. When taking into consideration home taxes, upkeep, insurance, un-rented months and so forth. The rental property seems like a massive headache for the same income as a dividend portfolio. Yes stocks go up and down but they are a lot more liquid than a property and can appreciate as considerably or more than actual estate in the same time period. Plus I can manage it all online remotely. A home sort of has to be baby sat. Is there one thing I'm missing?

[Renshaw]

There is Taxes, leveraging, and history. If you invest in actual estate, you can depreciate the value of the Building(not the land) more than 23 years(I think). In other words, if you purchase a home for $500,000(using your $100,000 as a down payment), the worth of the constructing will most likely be in the $200,000 to $250,000 variety. That functions out to about $ten,000 tax deduction per year for the for the first 23 years. Depreciation can turn a home that breaks even into a profit based on you tax bracket. Add to that the Deduction you get for your Interest payments, Tax payments, expenditures, vehicle rides to the home, and so on, and you can have revenue that is not only sheltered(untaxed), but provides some shelter for your other revenue. When you invest in Genuine Estate, you are leveraging your investment. Your $100,000 is getting a $500,000 property. As time goes on, If you hold that property, it will lose it is leverage(you owe $250,000 on that mortgage and the house is worth $750,000). When that happens, you can take out the equity and use it to acquire more income creating house. Add into this that if you are in an area without rent handle, your rents can go up with the marketplace. Within ten years, your rents could easily go up 50% to 70%. Your overall costs will not grow as quick(if you are able to get a fixed rate mortgage). This indicates that the yearly money on money returns will go up over time. History has shown that the price of return is about the very same(rental v. stocks), but when you add in the appreciation in home worth, the tax benefits, increasing rents, and the creating of equity, I do not think the returns are anywhere Near the identical. Genuine estate is more perform, but the rewards are significantly higher. You could constantly get fortunate and hit a Boom market place(well, not proper now, but possibly in a couple of years). If that takes place, your equity will develop really swiftly. If you are interested in actual estate without having the operate, you can invest in TIC properties, Triple net leases, or REITs(I'll leave you to google to function out what those are). dejapooh 69 months ago Please sign in to give a compliment. Please verify your account to give a compliment. Please sign in to send a message. Please confirm your account to send a message.

[Therron]

Sounds like you pretty much got it! I was a landlord for over a decade having both a single family home and a duplex. I was profitable, but ONLY because I was able to do most of the electrical, plumbing, repairs, maintenance and even the legal work myself. If you have to hire out for these things, it can get really expensive really fast and can eat up a lot of profit in a hurry! It doesn't matter where your building is, you always have to take vacancies into account. There is what's called "constructive eviction" whereby you have to have people move out while you do major repairs or renovations either planned or unplanned. This ran into up to three months for us a couple of times. Then, there's the costs of eviction when someone doesn't pay plus the cost of getting the place ready for the next tenant. This often ended up costing us a month of vacancy. Then you have to either lose the money they didn't pay, or endure the expense of taking them to court. Also aks yourself if you are willing to answer "emergency" phone calls from tenants any time day or night?(Most of ours came at night!) Otherwise, it sounds like you've pretty much taken everything into account. Investing in individual stocks is far riskier than most real estate, but if you own at least 100 stocks in different sectors you would be adequately diversified. I recommend to my clients to invest in stocks via mutual funds or ETFs. The historical return is 8 to 12% plus you are well diversified and have lower risk. With stocks, you can only lose what you have invested. With real estate, you can lose what you have invested plus legal fees, interest, and law suits. Plus, you don't have to keep coming up with operating money for stocks which you do for rental real estate. If you have to borrow heavily to buy the real estate, and don't have three to six months worth of income saved for emergencies, then a layoff, disability or other loss of income or job can cause you to lose the property to foreclosure. This never happened to me, but I've counseled at least two people who lost their rental properties that way. With stock investing, you can "set it and forget it." You can go on vacations and go have fun without worrying about it. With rental real estate, you always have to make sure someone is looking after the property. I have since sold my real estate to reduce the risk and the demands on my time; not to mention the late-night phone calls from tenants. I now just invest in mutual funds and ETFs. I'm much happier and much more free now. If you have the abilities, temperment, and money set aside for emergencies, then real estate can be a wonderful investment. Otherwise, just put your money into a nice, safe mutual fund or ETF and let it grow that way. Sources: www.eclecticsite.com/financial.html Keitharoo 69 months ago Please sign in to give a compliment. Please verify your account to give a compliment. Please sign in to send a message. Please verify your account to send a message.

[Gerd]

I was a landlord for over a decade having both a single family home and a duplex. I was profitable, but ONLY because I was able to do most of the electrical, plumbing, repairs, maintenance and even the legal work myself. If you have to hire out for these things, it can get really expensive really fast and can eat up a lot of profit in a hurry! It doesn't matter where your building is, you always have to take vacancies into account. There is what's called "constructive eviction" whereby you have to have people move out while you do major repairs or renovations either planned or unplanned. This ran into up to three months for us a couple of times. Then, there's the costs of eviction when someone doesn't pay plus the cost of getting the place ready for the next tenant. This often ended up costing us a month of vacancy. Then you have to either lose the money they didn't pay, or endure the expense of taking them to court. Also aks yourself if you are willing to answer "emergency" phone calls from tenants any time day or night?(Most of ours came at night!) Otherwise, it sounds like you've pretty much taken everything into account. Investing in individual stocks is far riskier than most real estate, but if you own at least 100 stocks in different sectors you would be adequately diversified. I recommend to my clients to invest in stocks via mutual funds or ETFs. The historical return is 8 to 12% plus you are well diversified and have lower risk. With stocks, you can only lose what you have invested. With real estate, you can lose what you have invested plus legal fees, interest, and law suits. Plus, you don't have to keep coming up with operating money for stocks which you do for rental real estate. If you have to borrow heavily to buy the real estate, and don't have three to six months worth of income saved for emergencies, then a layoff, disability or other loss of income or job can cause you to lose the property to foreclosure. This never happened to me, but I've counseled at least two people who lost their rental properties that way. With stock investing, you can "set it and forget it." You can go on vacations and go have fun without worrying about it. With rental real estate, you always have to make sure someone is looking after the property. I have since sold my real estate to reduce the risk and the demands on my time; not to mention the late-night phone calls from tenants. I now just invest in mutual funds and ETFs. I'm much happier and much more free now. If you have the abilities, temperment, and money set aside for emergencies, then real estate can be a wonderful investment. Otherwise, just put your money into a nice, safe mutual fund or ETF and let it grow that way.

[Wagner]

on a monthly basis, and it will never have the "opportunity" to drop to 0.  The stock market, on the other hand, *can* drop to zero if you're not on top of it all the time.

[MacCormack]

Yes, owning rental property can be a headache.  You have to deal with the tenants, and repairs, and taxes, and other stuff.  But there are tremendous tax breaks.   You get to write off, not just the mortgage interest, but the real estate taxes, insurance, repairs, labor, parts, and depreciation.  Depreciation is the symbolic wearing out of your property over time.  The IRS depreciates rental real estate over 25 years, so you get to write off 4% of the value of the property(minus the value of the land) every year.  This can really add up.   I set the rent of my rental properties to cover the mortgage, interest, taxes, insurance, and minor repairs.  They are always rented, and I have a positive cash flow, and my income tax refund is huge every year.  I think of it as my tenants building my retirement savings by paying off my real estate.  You do have to build up a fund to guard against the house being vacant for a while.  When they are all rented, they do not need to be baby sat.  You call when the rent is late, and make a quick repair when they call.  I can go months without hearing from my renters.   It is a lot of work.  You have to be hand with painting and plumbing and drywall and other repairs, or the labor will eat up your profits.  You can also hire a manager to deal with the tenants, but that eats into your profits as well.  If you just want to make an investment and watch it grow, then stocks are your best bet.  If you are willing to put some work into it, real estate can be very rewarding.  I have both as part of a diversified portfolio.   I hope this helps.