Author Topic: Real Estate Returns vs. Stock Returns: The Maths  (Read 27808 times)

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #150 on: December 05, 2015, 04:51:07 AM »

I found your podcast :D http://radicalpersonalfinance.com/78/ I'm listening to it. You need to tell him to get better music >.>

and I never realized your name was A Rebel Spy >.> I kept reading it as are-bel-spy as well

glad to hear that you made mistakes on first rental as well... so I'm still not sure of your use of example in starting this thread, he didn't make a mistake in the calculations

The mistake was not buying with strict enough criteria--I didn't quite meet the 1% rule on that first one. The imaginary person in our OP is starting with that as a baseline. :)
and that would be a learning curve... how would someone who never owned a rental to know this? because he read it online as a rule? even investors tinker with aa when starting out to find what they like... no matter what the internet says

i just find that you are passing a lot of what you learned already as things a first time rental owner would know since it is things you look for now.

unless you disclaimer the guy as experienced already and just getting around to buying a rental... in which case he would already be swayed to real estate... and the entire thing would be in that favor

basically, like you said in podcast, the returns of both are good, and simple things sway one or other or both in favor depending on person. so no "maths" would justify one over the other

kind of like you assume the investor isnt in a high fee fund... its just by chance that i am investing in modern times when vanguard is around. what happened before vanguard and no low fee funds? what happened when mortgage rates were double digits?
« Last Edit: December 05, 2015, 04:59:16 AM by eyem »

arebelspy

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #151 on: December 05, 2015, 05:32:17 AM »
I was going for an average scenario, today.

Naturally any change in the inputs changes the outputs.
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cheddarpie

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #152 on: December 08, 2015, 11:05:50 AM »
Off-topic, A Rebel Spy! I had no idea either ... always read it as Arebelspy as one word, like ere a bell's pee. Ha! Oops. Nice to be corrected ...

sol

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #153 on: December 08, 2015, 11:26:58 AM »
Off-topic, A Rebel Spy! I had no idea either ... always read it as Arebelspy as one word, like ere a bell's pee. Ha! Oops. Nice to be corrected ...

Rebs should collect all of the different ways he has heard this post expressed and compile them into a book.  There are probably a hundred from just this forum alone.

iamlindoro

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #154 on: December 08, 2015, 11:29:02 AM »
It's always been A Rebel Spy to me, but I'm a hardcore Star Wars fan from way back. 

See you guys at the premiere!!  Right, guys?

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #155 on: December 08, 2015, 11:34:40 AM »
How Trump Stacks Up Against Vanguard 500 Index (VFINX)

I recently ran across an interesting Trump story at NationalJournal.com, where they suggest the famous billionaire could have been even richer by “doing nothing.”

Here are some of the key points in the story (taken verbatim):
•While many Trump sup­port­ers be­lieve he is a self-made man, it was ac­tu­ally his fath­er, Fred Trump, who built the real-es­tate em­pire that Don­ald Trump took over in 1974.
•If he’d in­ves­ted the $200 mil­lion that For­bes magazine de­term­ined he was worth in 1982 in­to that in­dex fund, it would have grown to more than $8 bil­lion today.
•(That $8 billion) ex­ceeds by bil­lions re­cent es­tim­ates of Trump’s worth by fin­an­cial publications.
•Co­in­cid­ent­ally, there was a self-made busi­ness­man who was also worth about $40 million in 1974: War­ren Buf­fett. Had Trump al­lowed Buf­fett to man­age his for­tune, too, Trump might also be worth what Buf­fett is today: about $67 bil­lion — or about 22 times more.

Currently, the Forbes net worth for Donald Trump is pegged at $4 billion. That’s half what he could have produced by simply investing in a mutual fund like Vanguard S&P 500 Index.


Source: http://investorplace.com/2015/09/donald-trump-vs-vanguard-500-index-vfinx/#.VmKEehtdE5s
I'm not a fan, but as ARS points out, this isn't entirely a fair comparison.

What I will say is, Trump didn't buy established cash-flow properties, and he lost a lot of money along the way in bad deals. If it weren't for lawyers and bankruptcy laws, he'd have a lot less money because his plays are often highly speculative, risky developments. When he hits a home run, he makes a shit-ton. And sometimes he strikes out. This is the opposite of the systematic approach we're talking about, where choosing the right initial conditions means beating the market with mechanical, almost brutal precision.
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Markywalberg

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #156 on: January 03, 2016, 12:23:38 AM »
I think the math is great but in the end there are a ton a variables that you cant calculate. first being the 50% rule you can definitely tweak that in your favor if u do the upkeep yourself which is something you can learn overtime. 2nd Finding tenants quickly and lowering the vacancy rate is also something that should improve as you get better and more experience.3d as you said u can do better then the 1% rule even more so if u only have one property maybe not by a lot but say the place cost $100,000 and u get $1,100 or 1,200 rent its not that big of a jump but when u run calculations running 30-50 years that adds up fast. The main argument I make with RE AND STOCKS is when u buy a stock do u have any control in what the company does? When you decide to buy and rent you have all the control. On the downside if you put money into stocks u have no control and u don't have to do any work but if u invest in RE even if u hire someone else to do the work it will inevitably be more work then stocks you will still have to find tenants or file the paperwork for the business entity u form and the taxes required, etc, etc...

arebelspy

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #157 on: January 03, 2016, 12:30:59 AM »
I think the math is great but in the end there are a ton a variables that you cant calculate. first being the 50% rule you can definitely tweak that in your favor if u do the upkeep yourself which is something you can learn overtime. 2nd Finding tenants quickly and lowering the vacancy rate is also something that should improve as you get better and more experience.3d as you said u can do better then the 1% rule even more so if u only have one property maybe not by a lot but say the place cost $100,000 and u get $1,100 or 1,200 rent its not that big of a jump but when u run calculations running 30-50 years that adds up fast. The main argument I make with RE AND STOCKS is when u buy a stock do u have any control in what the company does? When you decide to buy and rent you have all the control. On the downside if you put money into stocks u have no control and u don't have to do any work but if u invest in RE even if u hire someone else to do the work it will inevitably be more work then stocks you will still have to find tenants or file the paperwork for the business entity u form and the taxes required, etc, etc...

The things you list (such as doing repairs yourself) are true, but add more work.  I was assuming outsourcing everything to make it as passive as possible.

As far as control, I don't want any control over what Apple, P&G, Nestle, etc. are doing.  I just want a share of their profits.

Of course both investments are different types of investments, fundamentally, so comparing them is difficult. RE has more control, but takes more work.  Equities are more passive, but much less control.

They're tailored for different people.

But still, we try and compare, and have to do the best we can to align the variables as close as possible to do so.  :)
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Tabaxus

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #158 on: January 03, 2016, 09:59:52 AM »
Very interesting post.  I will say that, as far as I can tell, it's completely impossible to come anywhere near the 1% rule in the condo market in Chicago.  An "alright" condo will run $250k or so in the downtown area, and you're not going to get $2,500/month for rent on a $250k unit (probably closer to $1,400-$1,600).  Expenses also seem to be higher because of ubiquitous condo association fees that can tack on a few hundred per month and very high property taxes.  It's a shame, honestly, because I'd really like to put some of my cash to work somewhere other than index funds, but so it goes. 

Spouse would also kill me if I tried to get into RE investing...

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #159 on: April 27, 2017, 10:55:28 PM »
My biggest disagreement with Arebelspy is the 1% rule and perhaps more specifically his characterizing investing properties cash flow positive as being investing and investing in areas where you get say less than 1% as being speculating.

If never lived in an area where you could get close to 1%. The only time I even saw it was buying properties in Vegas in 2011,2012.  The current property I'm buying there has .83% (10%/year) rent. 

Rental Property #1:  Purchase and rehab price: $45,000.    Immediate property appreciation due to repairs: $35,000.
Year 1 rent: $750 / month     1.67% of purchase price.
Year 2 rent: $765 / month     1.70%.
Year 3 rent: $780 / month     1.73%.   (Hopefully, we'll see, it's going vacant in a month.).

Rental Property #2: Purchase and rehab price: $50,000.    Immediate property appreciation due to repairs: $30,000.
Year 1 rent: $820 / month     1.64%
Year 2 rent: $850 / month     1.70%

Rental Property #3:  Purchase and expected rehab price: $45,000.  Immediate property appreciation due to repairs: $40,000
Expected Year 1 rent: $800 to $900:  1.78% to 2.00%.   

Yet it is still possible that it's a great investment.  You put $300K down on $1.5Mill house lose $30K/year in cash flow, but you are making $150K or even 100K/year  in appreciation that is a terrific cash on cash return.

It's not a CASH on cash return each year.  It's a CASH on cash loss each year.

Once you sell it, THEN you'll see the appreciation provide a CASH on cash return.
Until then, it's a pile of bricks and lumber on the ground that you toss cash into. :)


CptJack83

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #160 on: May 01, 2017, 03:11:58 PM »
In your assumptions, I think you are factoring in getting the same rents (1% or original purchase price) the entire 30 or 50 years.  I think you need to factor in a growth rate for rental appreciation.  It would seem that if you are increasing the value 3% a year, the ongoing 1% of rental income would be 1% of the new property value as opposed to a consistent 1% of the original purchase price.

andysandp

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #161 on: May 07, 2017, 06:27:15 AM »
In the original post by Arebelspy, he said "I'm ignoring taxes for simplicity's sake..."  He also didn't add 3% appreciation in rents.

Has anyone figured out the real return by actually including Taxes and Depreciation?  I think it's important because you are getting cash flow AFTER TAXES and Depreciation.

Let's assume

6% Rental Yield first year, after All Expenses including Management Fees, Cap Ex, Repairs, Taxes.
3% Increase in House Price, Rent, and Expenses each year
25% Tax Rate
Using Depreciation
Assuming reinvesting the Cash Flow AFTER Taxes/Depreciation into S and P, and getting 10% Return a year.
25% down payment
5% Rate for 30 years.

The calculators online don't include cash flow after taxes, or Depreciation.

Anyone have a real number return or compound % return?

Thanks!

« Last Edit: May 07, 2017, 07:29:32 AM by andysandp »

pumpkinlantern

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #162 on: May 07, 2017, 02:48:23 PM »
I think what's "best" really depends on the individual situation and personal investing style.

For an investing with a large net worth, I think it's good to have both - they grow in different ways and adds to diversification.

For someone who has to choose between one or the other, it depends.

The major advantage of real estate is leverage (and possibly taxes depending on your country/situation).
- Leverage is a great thing if your making money, but an awful thing if you are losing money/can't stay solvent, so you need a lot more of a safety net.
- You are highly exposed to interest rate risk (which may not be so relevant in the last few years, but could be in the future.
- You are usually dependent on the market you are living in (no point in buying into a ridiculous local market) as most people do not have the capacity to manage an investment income in a city far from where they live.
- Large transaction costs (realtor fees) and operational costs (maintenance, renovations)
- Generally more work (finding tenants, etc.)
- Difficult to buy and sell - it takes more time and effort to do this.

The major advantage of stocks:
- Easy to buy and sell
- Has a higher rate of return (not including leverage), but less ability for most normal people to get leverage (theoretically, if you could obtain a "mortgage" for stocks with same amount of leverage, you would be better off).
- You can buy stocks anywhere in the world (no geopolitical risk) and you can buy into cheaper markets globally if your local market is expensive.
- Generally takes less time/effort
- More volatile, which can be hard emotionally for some people.
- But may be less "tangible" for people to understand.

I don't think either asset class is inherently better or "safer".  It depends on your local market, whether you are comfortable with leverage and interest rate risk, whether you prefer liquidity+volatility vs. less liquidity+more tangible asset, and whether you prefer the "work" required to purchase and rent out real estate.

andysandp

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #163 on: May 08, 2017, 02:58:22 PM »
In order to make a fair comparison one needs to know what the projected long term return is for a particular RE investment.  S and P is historically 10% long term.

Does anyone have a good spreadsheet to calculate the compounded return of RE that includes Taxes, Depreciation AND cash flow reinvestment?
« Last Edit: May 08, 2017, 03:02:44 PM by andysandp »

Hargrove

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #164 on: May 08, 2017, 09:02:11 PM »
I am still curious about this because it seems to me that there are several variables in RE that are brutally difficult to calculate.

Stocks are easy. Pick your (few) assumptions and spit out a number between 9-12% over 30 years.

Real estate is much more like buying a single stock and going all-in on it. Also, you agree to a massive hassle to sell it. You're hoping your "company" remains relevant for a very, very long time. You have basically no idea what your local RE market will look like in 5 years, never mind 10 or 20. The costs of really bad tenants who can't afford to pay for damages they cause is a big risk you have to also assume. That your local RE market will go up is not the safest assumption either.

And yet, delicious, instant leverage...

I wonder if anyone who has managed a large number of properties could tell us about their average "major property-related setbacks per year" and how they would inflict themselves on the formulas here. No tenants for 3 months, or having to switch property managers, or major tenant neglect issue, etc. would dramatically affect the numbers.

MaikoTsumi

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #165 on: May 09, 2017, 06:40:08 AM »
In the original post by Arebelspy, he said "I'm ignoring taxes for simplicity's sake..."  He also didn't add 3% appreciation in rents.

Has anyone figured out the real return by actually including Taxes and Depreciation?  I think it's important because you are getting cash flow AFTER TAXES and Depreciation.


I have acquired my 7th property this year and have yet to pay taxes on any of the cash flow.  Depreciation has offset all my earnings.  Long term, eventually, taxes will impact me as each property seasons, but I will still not being paying my full income tax rate on these earnings.  Also, buying more properties adds to my depreciation pool and offsets income on older properties.  This past year, I have cash flowed approximately $25,000 with zero effect on my AGI.

andysandp

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #166 on: May 09, 2017, 08:07:22 PM »
In the original post by Arebelspy, he said "I'm ignoring taxes for simplicity's sake..."  He also didn't add 3% appreciation in rents.

Has anyone figured out the real return by actually including Taxes and Depreciation?  I think it's important because you are getting cash flow AFTER TAXES and Depreciation.


I have acquired my 7th property this year and have yet to pay taxes on any of the cash flow.  Depreciation has offset all my earnings.  Long term, eventually, taxes will impact me as each property seasons, but I will still not being paying my full income tax rate on these earnings.  Also, buying more properties adds to my depreciation pool and offsets income on older properties.  This past year, I have cash flowed approximately $25,000 with zero effect on my AGI.

Well keep in mind it's only your 7th year, and you may have 23 years left.   In your later years, you Interest payments will be smaller, therefore you will be paying more Taxes.

I really think the best way to analyze is input your own numbers into a spreadsheet that can show Returns after 5,10,20 and 30 years.  Then you can really make a good comparison to Stocks.

Anyone have a good spreadsheet that shows Cash Flow after Taxes/depreciation and Cash Flow reinvestment?

I really want to see the Math that Arebelspy was trying to show in his original post.
« Last Edit: May 09, 2017, 08:09:24 PM by andysandp »

sol

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #167 on: May 09, 2017, 08:49:47 PM »
I have built that spreadsheet several different ways, and in my case the stock market always wins out over long enough time frames.  You just can't beat 9.5 CAGR over 30 years.

Real estate can be more predictable in the short term, though.

DrF

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #168 on: May 10, 2017, 02:44:49 PM »
Quibbles with assumptions?

Quote
  • Inflation runs 3%, and the house appreciates at the rate of inflation.

How often does a particular piece of real estate appreciate at 3% for 30-50+ years? This is one hell of an assumption.

Here's another assumption - you buy a house for $100k (which is a very cheap house in probably not a good neighborhood) and appreciates 20% over 10 years (120k value). Then the neighborhood starts to decline as all the people start ageing and not taking care of their homes. This results in the home being worth only $90k 20 years after the initial purchase.

The problem with real estate is that you have to know how a neighborhood will be in 10, 30, or 50 years. Also, a $100k house is likely to be a junker. If it's not a junker, then it's likely in an area where prices haven't appreciated 3% annually and probably won't in the future.

Likely, you would have to at least buy a $200k+ house in an established neighborhood to ensure you get close to the 3% appreciation your scenario needs.

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #169 on: May 10, 2017, 07:18:07 PM »
Why would you only be able to invest $1,135.8 per year for years 31-50 if you have already paid off the mortgage by that point?

I understand the net profits would be ($1,000-$500-$405.35)*12=$1,135.8 profit per year to invest, but that should only be the case for the first 30 years.

So I think your you are shorting yourself on the 50 year return.
After the mortgage is paid off you would have an extra $4,864.20 per year (for a total of $6,000 per year) to invest for the next 20 years.

Alim Nassor

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #170 on: May 10, 2017, 08:11:45 PM »
Pretty easy to beat the 1% rule where we invest.  The last 2 houses we bought we paid 60k for each one, had less than 1k in repairs and one rents for 875 and the other rents for 900.  The first two we bought we paid 44k for 2 years ago, about 3k each in repairs and and each of them now rents for 800.  I wont even look at a house that only rents at 1%.

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #171 on: May 11, 2017, 09:36:38 AM »
Pretty easy to beat the 1% rule where we invest.  The last 2 houses we bought we paid 60k for each one, had less than 1k in repairs and one rents for 875 and the other rents for 900.  The first two we bought we paid 44k for 2 years ago, about 3k each in repairs and and each of them now rents for 800.  I wont even look at a house that only rents at 1%.

And this is why the 1% rule just doesn't work for everybody. REAL ESTATE IS LOCAL. LOCATION, LOCATION, LOCATION! It works for you because you live in an area with cheap houses. There are no houses within a hundred miles of me that sell for $60K. A very cheap house in my area is $200K, and it is going to rent for less than $2000/month. The 1% rule is reasonable for cheaper properties, but you won't generally find higher priced properties that meet the 1% rule. Also cheaper properties are more work in general, and a lot of times just aren't worth it. I wouldn't want most really cheap houses even if they met the 1% rule because they just wouldn't provide enough cash flow to make it worth my while. $100 per month in cashflow is just not worth the headache of owning a cheap house. I would rather have a $350K house that provides $500 in cashflow even if it doesn't meet the 1% rule.

andysandp

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #172 on: May 11, 2017, 09:52:41 AM »
OK, can we stop calling it the 1% rule since Expenses vary widely by location and price point?  1% was created assuming 50% would go to Expenses.

How about it calling it the 6% Rule.  You need a minimum of 6% Rental Yield for the year after ALL expenses. 
All expenses include Vacancies, Capex, Repairs, Condo Fees, RE Tax, Management Fees, and others.

Since the OP title is "RE Returns vs Stock Returns: The Maths", can we get some numbers for the Return after 30 years, that includes Cash Flow AFTER Taxes, Depreciation, Reinvesting the Cash Flow, and finally Closing/commission Costs?

« Last Edit: May 12, 2017, 04:06:33 PM by andysandp »

Alim Nassor

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #173 on: May 14, 2017, 12:17:32 PM »
Pretty easy to beat the 1% rule where we invest.  The last 2 houses we bought we paid 60k for each one, had less than 1k in repairs and one rents for 875 and the other rents for 900.  The first two we bought we paid 44k for 2 years ago, about 3k each in repairs and and each of them now rents for 800.  I wont even look at a house that only rents at 1%.

And this is why the 1% rule just doesn't work for everybody. REAL ESTATE IS LOCAL. LOCATION, LOCATION, LOCATION! It works for you because you live in an area with cheap houses. There are no houses within a hundred miles of me that sell for $60K. A very cheap house in my area is $200K, and it is going to rent for less than $2000/month. The 1% rule is reasonable for cheaper properties, but you won't generally find higher priced properties that meet the 1% rule. Also cheaper properties are more work in general, and a lot of times just aren't worth it. I wouldn't want most really cheap houses even if they met the 1% rule because they just wouldn't provide enough cash flow to make it worth my while. $100 per month in cashflow is just not worth the headache of owning a cheap house. I would rather have a $350K house that provides $500 in cashflow even if it doesn't meet the 1% rule.

I understand the assumption that cheaper houses are more work and that the cash flow may be less, but that hasn't been the case for us.  So far anyway.   People assume maintenance is more, but I really don't think it is.  The roof is smaller, there's only one water heater, the AC units are smaller and less costly, it takes less new flooring and paint.

 I also like that my cash on cash return is much higher than it would be on a 350k house that flows 500 dollars.

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #174 on: May 14, 2017, 12:40:24 PM »
OK, can we stop calling it the 1% rule since Expenses vary widely by location and price point?  1% was created assuming 50% would go to Expenses.

How about it calling it the 6% Rule.  You need a minimum of 6% Rental Yield for the year after ALL expenses. 
All expenses include Vacancies, Capex, Repairs, Condo Fees, RE Tax, Management Fees, and others.

Since the OP title is "RE Returns vs Stock Returns: The Maths", can we get some numbers for the Return after 30 years, that includes Cash Flow AFTER Taxes, Depreciation, Reinvesting the Cash Flow, and finally Closing/commission Costs?

Andy, I don't think this dataset exists. And realistically, we'd need data from multiple time periods in multiple real estate markets in order to do a mathematical comparison to stock market returns.

Some markets would have rapid price appreciation (sometimes rents would grow with property values, sometimes they wouldn't). Some would appreciate with inflation. Some would see rents drop. Some would see populations decline to the point where many houses became essentially worthless (like some towns in the rust belt). Some would see rent control laws introduced (Pacifica City introduced a new rent control law earlier this year). Some will see significant cuts in property taxes that increase the profitability of rentals (see Prop 13 in CA).
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andysandp

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #175 on: May 16, 2017, 09:17:47 AM »
OK, I had a friend make a spreadsheet that included 25% Tax Bracket, Depreciation, 5% Brokers Fee, Recapture Tax, Capital Gains Tax, and Closing Costs.

Let's assume 25% down, 30 Year at 5% rate.  3% appreciation for Home price, Rents, and Expenses.

Rent is 6% yearly yield after All Expenses including Management Fees, Cap Ex, Vacancies etc.
Let's assume Reinvesting the Cash flow into a Bond/Investment that gives 3% compounded return each year.

If you sell after 30 years the Return is 8.88% compounded.  Not too good.

If you sell after 15 years, the Return is 10.52% compounded.   OK, but not worth the RE work.
If you sell after 10 years, the Return is 11.12% compounded.  Not bad.

So it seems the longer you hold RE, the compounded Return gets smaller and smaller.


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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #176 on: May 16, 2017, 01:56:46 PM »
As previously stated, it's hard to beat the stock markets CAGR over sufficiently long time periods.

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #177 on: June 03, 2017, 02:06:08 AM »
The thing I really dislike about real estate is that it is an inherently riskier investment.

The risk of total loss is far more real for a single home than for a diversified portfolio of stocks.

The rental market can change, a neighborhood can worsen, an earthquake or flood can happen.

And leverage only increases your downside exposure.

You can insure against some of this of course, but if you insure against all of it, your returns will be severely effected.

Add on to that poor liquidity, the hassle of having to deal with tenants, finding competent managers, vacancies, etc, and I would take on a well diversified investment portfolio any day of the week.

It's just so much less work for a better return long term.

Agreed. Being a landlord is a lot of work and you have to have the right personality for it or else you will begin to begrudge it like any "Service Worker" job with more complex and expensive transactions. We found out the hard way that for us, personality wise, we thought it an absolute pain in the ars and did not enjoy it despite the money. Any phone call from the PM Company or tenant is rarely ever a good thing. If you can assemble a good maintenance team for things you can't do or don't want to do yourself, that is a plus or find good tenants that are HONEST and don't mind being handy once in a while but finding that for any length of time is just lucky.

SwordGuy

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #178 on: October 02, 2017, 08:47:28 PM »
...and that would be a learning curve... how would someone who never owned a rental to know this? because he read it online as a rule?

Well, I read it in books and online.  Then I did the math to double check it.
Then I read some more. 

Then I looked around for properties online and did the math to see if they might be workable, based upon some assumptions about what repairs might cost.

If the properties looked possible, we checked them out by walking around outside them and looking in the windows.  We dropped the ones that were in too much disrepair and then shopped for estimates.  Not official estimates, but estimates like "How much for a new roof, simple roofline, 1200sq foot of roof?"  Or, "How much for 1000 sq ft of this carpet, installed, assuming a regular plywood floor that's in decent shape?"

It took us about a calendar year before we were ready to commit to a property.

We're doing great on it.   

I already had basic carpentry skills and had owned a home for some decades, so I had some idea of repair costs.  A 22 yr old, as in the original scenario, would have to get more estimates and do a bit more reading.

This is well within the ability of regular folks to do if they set their minds to it - and do the research, the math, and the work it requires.

« Last Edit: October 03, 2017, 04:45:12 AM by SwordGuy »

zephyr911

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #179 on: October 05, 2017, 08:54:15 AM »
The thing I really dislike about real estate is that it is an inherently riskier investment.

The risk of total loss is far more real for a single home than for a diversified portfolio of stocks.

The rental market can change, a neighborhood can worsen, an earthquake or flood can happen.

And leverage only increases your downside exposure.

You can insure against some of this of course, but if you insure against all of it, your returns will be severely effected.

Add on to that poor liquidity, the hassle of having to deal with tenants, finding competent managers, vacancies, etc, and I would take on a well diversified investment portfolio any day of the week.

It's just so much less work for a better return long term.
But the reason we have this thread is because the long-term return is demonstrably not better with a balanced equity portfolio. ARS did the math and showed his work.
My experience backs this up, FTR.
I'm a complete ass-clown n00b in real estate and I'm pulling roughly 25% return on equity in my typical investment. That's with high vacancy rates and excessive maintenance costs due to crappy management (soon to be fired), a few delinquencies, and lots of catch-up work from years of prior neglect.

I'm not sure where you get the idea that the risk of total loss cannot be effectively insured. My company just bought four properties, 6 units total, $40K GSR, purchase price $260K but rebuild cost over $500K, and we paid $2800 up front for an entire year's insurance with fairly low deductibles.


Agreed. Being a landlord is a lot of work and you have to have the right personality for it or else you will begin to begrudge it like any "Service Worker" job with more complex and expensive transactions. We found out the hard way that for us, personality wise, we thought it an absolute pain in the ars and did not enjoy it despite the money. Any phone call from the PM Company or tenant is rarely ever a good thing. If you can assemble a good maintenance team for things you can't do or don't want to do yourself, that is a plus or find good tenants that are HONEST and don't mind being handy once in a while but finding that for any length of time is just lucky.

If you're buying the right stuff at the right price, and we are all in agreement that this is a big "if", almost all of that hassle is handled by someone else and you still beat the market. However, I don't deny that there is still an element of personal choice here.

And of course, the hassles you've decided to avoid are exactly what we're being compensated for, in the form of higher returns - "we" being those who choose to accept the ass-pain. :)
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arebelspy

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #180 on: October 05, 2017, 09:57:14 AM »
But the reason we have this thread is because the long-term return is demonstrably not better with a balanced equity portfolio. ARS did the math and showed his work.

Yeah, I was hoping someone would double check my math and find any problems.

None of the responses found anything wrong with the OP, other than disputing premises (e.g. "you can't get 1% in my area" or whatever).

If the premises of the OP hold, and I think there's plenty of times they do, as I made them fairly conservative/average scenarios in all directions, I think it's correct.

RE is more work. A bit more risk (that can be mitigated when you understand the risks). But much higher return.
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PizzaSteve

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #181 on: October 05, 2017, 10:27:24 AM »
The thing I really dislike about real estate is that it is an inherently riskier investment.

The risk of total loss is far more real for a single home than for a diversified portfolio of stocks.

The rental market can change, a neighborhood can worsen, an earthquake or flood can happen.

And leverage only increases your downside exposure.

You can insure against some of this of course, but if you insure against all of it, your returns will be severely effected.

Add on to that poor liquidity, the hassle of having to deal with tenants, finding competent managers, vacancies, etc, and I would take on a well diversified investment portfolio any day of the week.

It's just so much less work for a better return long term.
But the reason we have this thread is because the long-term return is demonstrably not better with a balanced equity portfolio. ARS did the math and showed his work.
My experience backs this up, FTR.
I'm a complete ass-clown n00b in real estate and I'm pulling roughly 25% return on equity in my typical investment. That's with high vacancy rates and excessive maintenance costs due to crappy management (soon to be fired), a few delinquencies, and lots of catch-up work from years of prior neglect.

I'm not sure where you get the idea that the risk of total loss cannot be effectively insured. My company just bought four properties, 6 units total, $40K GSR, purchase price $260K but rebuild cost over $500K, and we paid $2800 up front for an entire year's insurance with fairly low deductibles.


Agreed. Being a landlord is a lot of work and you have to have the right personality for it or else you will begin to begrudge it like any "Service Worker" job with more complex and expensive transactions. We found out the hard way that for us, personality wise, we thought it an absolute pain in the ars and did not enjoy it despite the money. Any phone call from the PM Company or tenant is rarely ever a good thing. If you can assemble a good maintenance team for things you can't do or don't want to do yourself, that is a plus or find good tenants that are HONEST and don't mind being handy once in a while but finding that for any length of time is just lucky.

If you're buying the right stuff at the right price, and we are all in agreement that this is a big "if", almost all of that hassle is handled by someone else and you still beat the market. However, I don't deny that there is still an element of personal choice here.

And of course, the hassles you've decided to avoid are exactly what we're being compensated for, in the form of higher returns - "we" being those who choose to accept the ass-pain. :)
A quick RE note for great deals that are remote to your personal situation.

Nightmare scenarios happen, even when deals look bullet proof.  Buy a foreclosure home and instantly hit positive cash flow? Great.

However, what happens if your target market suddenly decays as part of a national or local crisis?  Floods or economy crash, plant closing, for example.  Perhaps to the point where the supply of banks (for leverage), property managers, and tenants (economy) dry up at the same time?  This is the RE equivalent to a market crash.  It happens, it happened to me.  I personally had this happen in one of the most promising cities, in terms of cash flow and lost pretty much 100% of an investment in mutiple homes.  In times of stress, local governments will be desperate for cash and rob you. Local business managers may also cheat and steal.  They may have started out honest, but while the house of cards is falling locally, good men and women often go bad (they may send statements that look great, while they are spending your reserves and filing to declare personal bankruptsy).  Good luck collecting your past due rents from your defunct property manager via the courts.

Meanwhile, at the same time they are killing rental subsidies, your local govt will likely be looking at you to balance their books.  Their tax collectors msy raise rates or will likely deny applications for reassessments.   So you may not get any tax relief for vacant units, perhaps a notice of a bill to remove blight left behind by a squatter.  Realtors may not even be willing to list properties for sale, especially those that fall too low in value. Need to replace your manager?  Good local managers may not be able or willing to rent your properties for you.  Your local partners may start stealing the rent and then dissappear (not to mention selling your copper pipes).

Just saying it is not a sure thing.  People lie in real estate all the time.  Overall we have done ok, as some big wins balanced out the 100% loss scenario.  But big lessons learned by many in 2008-9.
« Last Edit: October 05, 2017, 10:36:27 AM by PizzaSteve »
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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #182 on: October 05, 2017, 12:26:56 PM »
The thing I really dislike about real estate is that it is an inherently riskier investment.

The risk of total loss is far more real for a single home than for a diversified portfolio of stocks.

The rental market can change, a neighborhood can worsen, an earthquake or flood can happen.

And leverage only increases your downside exposure.

You can insure against some of this of course, but if you insure against all of it, your returns will be severely effected.

Add on to that poor liquidity, the hassle of having to deal with tenants, finding competent managers, vacancies, etc, and I would take on a well diversified investment portfolio any day of the week.

It's just so much less work for a better return long term.
But the reason we have this thread is because the long-term return is demonstrably not better with a balanced equity portfolio. ARS did the math and showed his work.
My experience backs this up, FTR.
I'm a complete ass-clown n00b in real estate and I'm pulling roughly 25% return on equity in my typical investment. That's with high vacancy rates and excessive maintenance costs due to crappy management (soon to be fired), a few delinquencies, and lots of catch-up work from years of prior neglect.

I'm not sure where you get the idea that the risk of total loss cannot be effectively insured. My company just bought four properties, 6 units total, $40K GSR, purchase price $260K but rebuild cost over $500K, and we paid $2800 up front for an entire year's insurance with fairly low deductibles.


Agreed. Being a landlord is a lot of work and you have to have the right personality for it or else you will begin to begrudge it like any "Service Worker" job with more complex and expensive transactions. We found out the hard way that for us, personality wise, we thought it an absolute pain in the ars and did not enjoy it despite the money. Any phone call from the PM Company or tenant is rarely ever a good thing. If you can assemble a good maintenance team for things you can't do or don't want to do yourself, that is a plus or find good tenants that are HONEST and don't mind being handy once in a while but finding that for any length of time is just lucky.

If you're buying the right stuff at the right price, and we are all in agreement that this is a big "if", almost all of that hassle is handled by someone else and you still beat the market. However, I don't deny that there is still an element of personal choice here.

And of course, the hassles you've decided to avoid are exactly what we're being compensated for, in the form of higher returns - "we" being those who choose to accept the ass-pain. :)
A quick RE note for great deals that are remote to your personal situation.

Nightmare scenarios happen, even when deals look bullet proof.  Buy a foreclosure home and instantly hit positive cash flow? Great.

However, what happens if your target market suddenly decays as part of a national or local crisis?  Floods or economy crash, plant closing, for example.  Perhaps to the point where the supply of banks (for leverage), property managers, and tenants (economy) dry up at the same time?  This is the RE equivalent to a market crash.  It happens, it happened to me.  I personally had this happen in one of the most promising cities, in terms of cash flow and lost pretty much 100% of an investment in mutiple homes.  In times of stress, local governments will be desperate for cash and rob you. Local business managers may also cheat and steal.  They may have started out honest, but while the house of cards is falling locally, good men and women often go bad (they may send statements that look great, while they are spending your reserves and filing to declare personal bankruptsy).  Good luck collecting your past due rents from your defunct property manager via the courts.

Meanwhile, at the same time they are killing rental subsidies, your local govt will likely be looking at you to balance their books.  Their tax collectors msy raise rates or will likely deny applications for reassessments.   So you may not get any tax relief for vacant units, perhaps a notice of a bill to remove blight left behind by a squatter.  Realtors may not even be willing to list properties for sale, especially those that fall too low in value. Need to replace your manager?  Good local managers may not be able or willing to rent your properties for you.  Your local partners may start stealing the rent and then dissappear (not to mention selling your copper pipes).

Just saying it is not a sure thing.  People lie in real estate all the time.  Overall we have done ok, as some big wins balanced out the 100% loss scenario.  But big lessons learned by many in 2008-9.

If there was a real estate crash and people started losing their homes, wouldn't there be a stronger rental market for the people who can no longer afford their home?

arebelspy

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #183 on: October 05, 2017, 02:41:39 PM »

If there was a real estate crash and people started losing their homes, wouldn't there be a stronger rental market for the people who can no longer afford their home?

This was indeed the case in 08-11.

His points about bad managers, rising costs, etc. are all valid, and worth having a plan for (and higher vacancies as well; I wouldn't count on a stronger rental market in a crash, though it very well may happen).
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with a kid.
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We (occasionally) blog at AdventuringAlong.com.
You can also read my forum "Journal."

SwordGuy

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #184 on: October 05, 2017, 04:51:32 PM »

If there was a real estate crash and people started losing their homes, wouldn't there be a stronger rental market for the people who can no longer afford their home?

This was indeed the case in 08-11.



It's also possible for rents to collapse in an area.  That would happen if people start to leave the area in droves to find a job elsewhere. 

PizzaSteve

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #185 on: October 05, 2017, 06:30:36 PM »
The thing I really dislike about real estate is that it is an inherently riskier investment.

The risk of total loss is far more real for a single home than for a diversified portfolio of stocks.

The rental market can change, a neighborhood can worsen, an earthquake or flood can happen.

And leverage only increases your downside exposure.

You can insure against some of this of course, but if you insure against all of it, your returns will be severely effected.

Add on to that poor liquidity, the hassle of having to deal with tenants, finding competent managers, vacancies, etc, and I would take on a well diversified investment portfolio any day of the week.

It's just so much less work for a better return long term.
But the reason we have this thread is because the long-term return is demonstrably not better with a balanced equity portfolio. ARS did the math and showed his work.
My experience backs this up, FTR.
I'm a complete ass-clown n00b in real estate and I'm pulling roughly 25% return on equity in my typical investment. That's with high vacancy rates and excessive maintenance costs due to crappy management (soon to be fired), a few delinquencies, and lots of catch-up work from years of prior neglect.

I'm not sure where you get the idea that the risk of total loss cannot be effectively insured. My company just bought four properties, 6 units total, $40K GSR, purchase price $260K but rebuild cost over $500K, and we paid $2800 up front for an entire year's insurance with fairly low deductibles.


Agreed. Being a landlord is a lot of work and you have to have the right personality for it or else you will begin to begrudge it like any "Service Worker" job with more complex and expensive transactions. We found out the hard way that for us, personality wise, we thought it an absolute pain in the ars and did not enjoy it despite the money. Any phone call from the PM Company or tenant is rarely ever a good thing. If you can assemble a good maintenance team for things you can't do or don't want to do yourself, that is a plus or find good tenants that are HONEST and don't mind being handy once in a while but finding that for any length of time is just lucky.

If you're buying the right stuff at the right price, and we are all in agreement that this is a big "if", almost all of that hassle is handled by someone else and you still beat the market. However, I don't deny that there is still an element of personal choice here.

And of course, the hassles you've decided to avoid are exactly what we're being compensated for, in the form of higher returns - "we" being those who choose to accept the ass-pain. :)
A quick RE note for great deals that are remote to your personal situation.

Nightmare scenarios happen, even when deals look bullet proof.  Buy a foreclosure home and instantly hit positive cash flow? Great.

However, what happens if your target market suddenly decays as part of a national or local crisis?  Floods or economy crash, plant closing, for example.  Perhaps to the point where the supply of banks (for leverage), property managers, and tenants (economy) dry up at the same time?  This is the RE equivalent to a market crash.  It happens, it happened to me.  I personally had this happen in one of the most promising cities, in terms of cash flow and lost pretty much 100% of an investment in mutiple homes.  In times of stress, local governments will be desperate for cash and rob you. Local business managers may also cheat and steal.  They may have started out honest, but while the house of cards is falling locally, good men and women often go bad (they may send statements that look great, while they are spending your reserves and filing to declare personal bankruptsy).  Good luck collecting your past due rents from your defunct property manager via the courts.

Meanwhile, at the same time they are killing rental subsidies, your local govt will likely be looking at you to balance their books.  Their tax collectors msy raise rates or will likely deny applications for reassessments.   So you may not get any tax relief for vacant units, perhaps a notice of a bill to remove blight left behind by a squatter.  Realtors may not even be willing to list properties for sale, especially those that fall too low in value. Need to replace your manager?  Good local managers may not be able or willing to rent your properties for you.  Your local partners may start stealing the rent and then dissappear (not to mention selling your copper pipes).

Just saying it is not a sure thing.  People lie in real estate all the time.  Overall we have done ok, as some big wins balanced out the 100% loss scenario.  But big lessons learned by many in 2008-9.

If there was a real estate crash and people started losing their homes, wouldn't there be a stronger rental market for the people who can no longer afford their home?
You are tallking theory.  When there are no renters for the homes you own, there are no renters.  In this case, there were so many high end foreclosures available to rent, for dirt cheap, no one worth renting to was interested in older, low end homes.  Sure the rental market for other properties might be improved.  That doesnt necessarily help you.
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makinbutter

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #186 on: October 07, 2017, 10:56:22 AM »
OK, I had a friend make a spreadsheet that included 25% Tax Bracket, Depreciation, 5% Brokers Fee, Recapture Tax, Capital Gains Tax, and Closing Costs.

Let's assume 25% down, 30 Year at 5% rate.  3% appreciation for Home price, Rents, and Expenses.

Rent is 6% yearly yield after All Expenses including Management Fees, Cap Ex, Vacancies etc.
Let's assume Reinvesting the Cash flow into a Bond/Investment that gives 3% compounded return each year.

If you sell after 30 years the Return is 8.88% compounded.  Not too good.

If you sell after 15 years, the Return is 10.52% compounded.   OK, but not worth the RE work.
If you sell after 10 years, the Return is 11.12% compounded.  Not bad.

So it seems the longer you hold RE, the compounded Return gets smaller and smaller.

Chiming in because it does not seem that anyone addressed this post. 

With all due respect, Andy, I think you're ignoring the fact that in a long-term buy-and-hold real estate purchase scenario as you have outlined above, the purchaser is also receiving principal paydown on his loan (e.g., he's getting a paid-off asset).  Yes, as stated previously in the thread, the return on rents will converge back to 6% as you essentially delever by paying off more and more of the principal on the loan (and subsequently having more and more of your money locked up in equity in the rental)... but you also have a paid off rental with some massive equity, which you can either re-lever, keeping your rental returns at those higher rates, or you can just sell the rental after it is completely delevered (read: paid off), and use the proceeds to buy stocks.  All the while you will have been collecting rents, too.

RE makes money in one of four ways
1) rents;
2) appreciation;
3) principal paydown;
4) preferential tax treatment.

In your example above, it seems - to me - that you're ignoring 3-4.  Factor in the principal paydown and appreciation (even at inflation rates) and you come out way, way ahead with RE versus stocks.

Something nobody has noted (I think) explicitly in the thread is the inherent effect of cheap leverage on the gains you enjoy from even modest appreciation.  In ARS' example above, if you have a 100k house on which you've put down 20k, and the house appreciates even a piddling 2k per year, due to the magic of leverage, you are rewarded by an additional 10% return on your original investment just from that appreciation alone (2k in appreciation / your original 20k investment = 10%, completely independent of rents received). 

Uncallable, relatively-cheap leverage is - IMHO - the best reason to consider RE versus stocks.  Caveat emptor, of course, that it bites both ways, and if your house starts depreciating in value (due to Detroit style breakdown of the market), then the leverage will absolutely crush your returns.  If your house loses 2k per year, you're losing 2k/20k = 10% right there.  Ouch.  So ideally pick an area that will stay flat/increase at pace with inflation.

Now let's all go get filthy rich.

kenmoremmm

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #187 on: October 19, 2017, 10:03:39 PM »
Quote
Something nobody has noted (I think) explicitly in the thread is the inherent effect of cheap leverage on the gains you enjoy from even modest appreciation.  In ARS' example above, if you have a 100k house on which you've put down 20k, and the house appreciates even a piddling 2k per year, due to the magic of leverage, you are rewarded by an additional 10% return on your original investment just from that appreciation alone (2k in appreciation / your original 20k investment = 10%, completely independent of rents received). 

i've always wondered about this, but isn't your leverage being eroded by the fact you are paying interest? is your $20k initial investment not accumulating each month due to interest payments?

further, i have also always felt the perceived tax 'benefits' of home ownership is overblow. sure, rentals and schedule E works out fine, but for your primary, you need to pay a lot of interest to exceed the standard deduction amount.

makinbutter

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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #188 on: October 20, 2017, 02:53:53 PM »
Quote
Something nobody has noted (I think) explicitly in the thread is the inherent effect of cheap leverage on the gains you enjoy from even modest appreciation.  In ARS' example above, if you have a 100k house on which you've put down 20k, and the house appreciates even a piddling 2k per year, due to the magic of leverage, you are rewarded by an additional 10% return on your original investment just from that appreciation alone (2k in appreciation / your original 20k investment = 10%, completely independent of rents received). 

i've always wondered about this, but isn't your leverage being eroded by the fact you are paying interest? is your $20k initial investment not accumulating each month due to interest payments?

further, i have also always felt the perceived tax 'benefits' of home ownership is overblow. sure, rentals and schedule E works out fine, but for your primary, you need to pay a lot of interest to exceed the standard deduction amount.


Hey bro, I'm not entirely sure what you meant by "leverage being eroded by the fact that you are paying interest."  Yes, you are paying interest, but you're making more in rents (on a percentage basis) than it costs you to borrow the money - this is the definition of leverage, and frankly, one of the sexiest reasons to do real estate to begin with.  I can't think of anywhere else where you get a cheap,  long-term, non-callable leverage.  If someone would give me 4% money - and no option to call the loan in - for 30 years, I would take out a kazillion dollars and put it in the stock market today for good.

To keep it simple, here's some back of the envelope math.

You buy a 100k house that rents for 1k monthly.  You put down 20k.  The bank loans you 80k at 5% - let's assume it is interest only for ease of the maths.  After one year, the house has appreciated to 102k.  What was your return overall?

First, your cost.  You had to pay the bank 5% interest on the 80k they have so graciously loaned you, or 4k, for the privilege of holding their money.  Boo, hiss.  You are down 4k. (-4k)

Your house cranked out rents, though, on the order of 12k!  Let's say you lost half of that in expenses, so you profited 6k in rents.  (+6k)

...But the house also appreciated in value at inflation rates (of 2%) for a 2k net gain! (+2k)

Ergo, your total return for the one year would be... -4 + 6 + 2, or 4k.  On a 20k investment, this is pretty darn good, no?

If you wanted to factor in inflation, the simple math would be something like: your 20k has sat around doing nothing for you (boo, hiss), so it has eroded by the 2% that we brought up above.  Stuff that previously cost $100 now costs $102.  Your 20k is now only worth... $19607 .  So technically, if we are accounting for your stale-ass 20k sitting around and losing value, your net gain of $4k above would probably more accurate be described as a net gain of $3607, still a pretty solid return on 20k.

Most people I have talked to seem to take appreciation as an "icing on the cake scenario," meaning that in the example above, you'd "only" profit $1607 on your initial 20k investment.  Still not bad... and that's assuming that the house doesn't even appreciate with inflation, which should proooobably not happen.



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Re: Real Estate Returns vs. Stock Returns: The Maths
« Reply #189 on: Today at 08:42:18 AM »
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Something nobody has noted (I think) explicitly in the thread is the inherent effect of cheap leverage on the gains you enjoy from even modest appreciation.  In ARS' example above, if you have a 100k house on which you've put down 20k, and the house appreciates even a piddling 2k per year, due to the magic of leverage, you are rewarded by an additional 10% return on your original investment just from that appreciation alone (2k in appreciation / your original 20k investment = 10%, completely independent of rents received). 

i've always wondered about this, but isn't your leverage being eroded by the fact you are paying interest? is your $20k initial investment not accumulating each month due to interest payments?


No, your leverage is eroded by the fact that you're paying PRINCIPAL. :)

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further, i have also always felt the perceived tax 'benefits' of home ownership is overblow. sure, rentals and schedule E works out fine, but for your primary, you need to pay a lot of interest to exceed the standard deduction amount.

Yep, the tax code is more advantageous to rental property, where those costs come straight off the top of your business income, than it is to homeownership, where qualifying costs (which are fewer to begin with) in the amount of your standard deduction are effectively excluded from consideration.

For some people, this means the majority of qualifying costs are excluded. If you pick a small, affordable home in a LCOL area like I did, it might not even benefit you at all (itemized deductions < standard deduction). But that's OK with me. The only thing better than getting a tax deduction for an expense is not having that expense to begin with.
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