Wealth and the Stockbroker

Sorry, I put up this message in spurts while doing other things.  As I was proofreading I see I made a couple errors.  Bring on the grammatical firing squad.

Your observations are true in my experiences as well.  Though you should also include inheritances as well. The brokerage business can provide excellent cash flow, but rarely provide true wealth over time.

As an FA, I think our job with these types of individuals is simply to make sure their cash is working hard for them (i.e. muni's). Generally, I recommend against the ultra-wealthy from investing in stocks, unless they truly enjoy the markets and want to open the casino for a (very) small portion of their $.  My opinion is that they've already made the $, so preserve it. Why take the risk?

[quote=BankFC]Most made money in 1 of 2 ways.  Self employed business owner or real estate.[/quote]

I would agree.  I don't know anyone who became filthy rich by investing in the stock market.

I think your post has some relevance to it.  However, why would anyone come see YOU if they have made a fortune in the market?  That is no diss on your or anyone, but if a guy had make all of his wealth from brilliant investing in equities, why is he seeking your (or anyone else’s) advice?  Wouldn't he stick with the guy that made him all the money, or himself if he was the one who chose his investments.  <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

I'm in no way saying we can not help these people, but someone who has had that much success would generally not be out looking for someone new unless he is mad at his broker.  Most people don't get mad at brokers who make them millionaires though. 

I guess you could find them if you offered a very specialized service that their current broker doesn't offer. 

Interesing views here...

I would submit that the reason that this business rarely provides wealth for us is that too many of us want to spend it before we have it.  We have an image to uphold.  We want to reward ourselves for all of our hard work.  We want to buy pricey, but small and useless dogs.  The trophy wife is expensive to maintain, etc.,etc.,etc.

As far as "rich" goes, it all depends upon the yardstick used.  If getting to $1 mil is "rich", I'm there now, and I'm a long way from retiring.  With a little discipline, a million dollars is not at all difficult to achieve using today's numbers.  If rich is $20-30 million, then no, I probably won't get there but who knows...I haven't sat down to work through the compounding of earnings calculation.

I am self-employed and I have and do dabble in real estate (with mixed results).  Given that I'm new to the self emplyment gig, and my success in real estate has been limited, I'll submit myself as a posterchild that you can accumulate a mil in this business.  I'd venture to guess that many million dollar producers retain several times that.  I can tell you that some of my competitors are without a doubt, millionaires, and I'm guessing that most of them will be by the time they retire.  If you're seeing a lot o advisors that will not retire with even one million dollars, I will submit that either they are not very successful as advisors or they have a woefully inadequate spending discipline.

Judge,  I'm curious as to how you came to the capital preservation strategy.  I know the wealthy have plenty of margin for error, but isn't it our mission to attempt to grow that capital as far as we reasonably can?

I do have one client who I would consider "rich" as a result of investing in the stock market.  I always say that he lived the mountain chart so many mutual fund companies like to use in their marketing pieces.  As a young man and bachelor, he was a very dedicated saver.  He invested his first money in the stock market in 1934.  He served in WWII as a relatively older soldeir, but did not cash most of his GI paychecks.  At the end of the war, he invested that money, too. 

Today, he is almost 90 years old, and still sharp as a tack.  He holds about 40 equity positions.  He can probably recite 37 of them from memory on a moment's notice.  He knows approximately how many shares of each that he owns, the current dividend yield, about what his basis is in each position, etc., etc.  He has gifted millions of dollars in the past several years to The Boys and Girls Clubs, UNICEF, Project Smile, The Fellowship of Christian Athletes, and his church just to name a few.  He is not a college graduate. 

In case you're wondering, his most recent purchase was Ford (F)--against my advice.  He is already up significantly from his purchase price.  A good knack for the market doesn't hurt, either.

[quote=Soothsayer]

I do have one client who I would consider "rich" as a result of investing in the stock market.  I always say that he lived the mountain chart so many mutual fund companies like to use in their marketing pieces.  As a young man and bachelor, he was a very dedicated saver.  He invested his first money in the stock market in 1934.  He served in WWII as a relatively older soldeir, but did not cash most of his GI paychecks.  At the end of the war, he invested that money, too. 

Today, he is almost 90 years old, and still sharp as a tack.  He holds about 40 equity positions.  He can probably recite 37 of them from memory on a moment's notice.  He knows approximately how many shares of each that he owns, the current dividend yield, about what his basis is in each position, etc., etc.  He has gifted millions of dollars in the past several years to The Boys and Girls Clubs, UNICEF, Project Smile, The Fellowship of Christian Athletes, and his church just to name a few.  He is not a college graduate. 

In case you're wondering, his most recent purchase was Ford (F)--against my advice.  He is already up significantly from his purchase price.  A good knack for the market doesn't hurt, either.

[/quote]

How old do you think he was in World War II?

About 30 years old.  Why do you ask?  And, BTW, where is my prize for winning your “where in the world was this picture taken” contest?

[quote=Indyone]

Interesing views here…

I would submit that the reason that this business rarely provides wealth for us is that too many of us want to spend it before we have it.  We have an image to uphold.  We want to reward ourselves for all of our hard work.  We want to buy pricey, but small and useless dogs.  The trophy wife is expensive to maintain, etc.,etc.,etc.

As far as "rich" goes, it all depends upon the yardstick used.  If getting to $1 mil is "rich", I'm there now, and I'm a long way from retiring.  With a little discipline, a million dollars is not at all difficult to achieve using today's numbers.  If rich is $20-30 million, then no, I probably won't get there but who knows...I haven't sat down to work through the compounding of earnings calculation.

I am self-employed and I have and do dabble in real estate (with mixed results).  Given that I'm new to the self emplyment gig, and my success in real estate has been limited, I'll submit myself as a posterchild that you can accumulate a mil in this business.  I'd venture to guess that many million dollar producers retain several times that.  I can tell you that some of my competitors are without a doubt, millionaires, and I'm guessing that most of them will be by the time they retire.  If you're seeing a lot o advisors that will not retire with even one million dollars, I will submit that either they are not very successful as advisors or they have a woefully inadequate spending discipline.

Judge,  I'm curious as to how you came to the capital preservation strategy.  I know the wealthy have plenty of margin for error, but isn't it our mission to attempt to grow that capital as far as we reasonably can?

My office has a bunch of reps that have piles and piles of MER with
basis of a couple bucks…all well beyond 7 figures.  I am not
saying this is the way to go, but it is fact right now anyway.

That just proves that millionaire advisors are far more common than once thought…

I see wealthy older brokers who have worked hard.

I see young idiotic brokers making alot of money and spending it all.

[quote=BankFC]

It seems to me from my experience in this business that us brokers rarely get "rich."  We as a group may dress nice, have nice cars, but if in the end (retirement) if we have anywhere close to a million dollars to show for it we are lucky. 

However, we are in the unique position (along with lawyers, CPA's, and bankers) to get a "free look" if you will into how fortunes are made by many people. 

I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.

Most made money in 1 of 2 ways.  Self employed business owner or real estate.

The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.

That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.

It astounds me to see the type of money being made.

Argue with me if you wish, but I see it happen every day.  It amazes me, and the whole time

Anyway, I just thought I'd put this out here as self expression.  Take it for what you will, and all snide comments are welcome.

[/quote]

You don't have experience in this business. YOu are a bank employee. YOu are not in any business. The bank is in this business.

My observations largely confirm your statement.  I of course can think of many exceptions but looking at those who I know I would estimate that more than 50% made their “fortunes” through self-employment or real estate.  Another large chunk of the ultra high net worth individuals made their fortunes through stock options granted while serving long tenures at large multi-national corporations.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

I don’t necessarily agree that we can’t become “rich” as financial advisors.  Maybe my office is an exception, but the majority (my guess is 90%) are receiving compensation in excess of $200K/year with some even as high as the seven-figures.  While $200K/year may not make you “rich” it is certainly better than the average salary in corporate <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />America.

--WM

[quote=knucklehead][quote=BankFC]

It seems to me from my experience in this business that us brokers rarely get "rich."  We as a group may dress nice, have nice cars, but if in the end (retirement) if we have anywhere close to a million dollars to show for it we are lucky. 

However, we are in the unique position (along with lawyers, CPA's, and bankers) to get a "free look" if you will into how fortunes are made by many people. 

I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.

Most made money in 1 of 2 ways.  Self employed business owner or real estate.

The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.

That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.

It astounds me to see the type of money being made.

Argue with me if you wish, but I see it happen every day.  It amazes me, and the whole time

Anyway, I just thought I'd put this out here as self expression.  Take it for what you will, and all snide comments are welcome.

[/quote]

You don't have experience in this business. YOu are a bank employee. YOu are not in any business. The bank is in this business.

[/quote]

You are an idiot.  This thread was about as civilized and smut free as I have seen in awhile, and then you come along and show your lack of a brain.

Not worth my keystrokes.

I appreciate everyone else's point of view! 

knucklehead is a good handle for you, but I like wasteofskin better.

A Financial Advisor can work in many channels, the bank is just one example.

Did you know you can be a LPL rep and work in a bank? dork

[quote=BankFC][quote=knucklehead][quote=BankFC]

It seems to me from my experience in this business that us brokers rarely get "rich."  We as a group may dress nice, have nice cars, but if in the end (retirement) if we have anywhere close to a million dollars to show for it we are lucky. 

However, we are in the unique position (along with lawyers, CPA's, and bankers) to get a "free look" if you will into how fortunes are made by many people. 

I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.

Most made money in 1 of 2 ways.  Self employed business owner or real estate.

The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.

That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.

It astounds me to see the type of money being made.

Argue with me if you wish, but I see it happen every day.  It amazes me, and the whole time

Anyway, I just thought I'd put this out here as self expression.  Take it for what you will, and all snide comments are welcome.

[/quote]

You don't have experience in this business. YOu are a bank employee. YOu are not in any business. The bank is in this business.

[/quote]

You are an idiot.  This thread was about as civilized and smut free as I have seen in awhile, and then you come along and show your lack of a brain.

Not worth my keystrokes.

[/quote]

Hey pooh-pooh head...first you said "all snide comments are welcome." Second...what did I say that is NOT true? Here's a hint...it rhymes with "nothing."

[quote=vbrainy]

knucklehead is a good handle for you, but I like wasteofskin better.

A Financial Advisor can work in many channels, the bank is just one example.

Did you know you can be a LPL rep and work in a bank? dork

[/quote]

May I suggest you carefully read what I wrote so you don't have to prove to the world that you are a moron? By the way...your mom needs a bath. Sorry.

[quote=BankFC][quote=knucklehead][quote=BankFC]

It seems to me from my experience in this business that us brokers rarely get "rich."  We as a group may dress nice, have nice cars, but if in the end (retirement) if we have anywhere close to a million dollars to show for it we are lucky. 

However, we are in the unique position (along with lawyers, CPA's, and bankers) to get a "free look" if you will into how fortunes are made by many people. 

I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.

Most made money in 1 of 2 ways.  Self employed business owner or real estate.

The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.

That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.

It astounds me to see the type of money being made.

Argue with me if you wish, but I see it happen every day.  It amazes me, and the whole time

Anyway, I just thought I'd put this out here as self expression.  Take it for what you will, and all snide comments are welcome.

[/quote]

You don't have experience in this business. YOu are a bank employee. YOu are not in any business. The bank is in this business.

[/quote]

You are an idiot.  This thread was about as civilized and smut free as I have seen in awhile, and then you come along and show your lack of a brain.

Not worth my keystrokes.

If anyone cares, I know plenty of people who have gone the insurance route and have become wealthy.

When it comes to 2nd generation wealth, I'd certainly rather be the kid of a successful insurance producer than one of a successful broker.

[quote=anonymous]

When it comes to 2nd generation wealth, I'd certainly rather be the kid of a successful insurance producer than one of a successful broker.

[/quote]

What does that mean?  To the extent that accumlated wealth is a measure of success, are there different standards, different totals, among the various professions?

If you inherit $1 million earned by your insurance agent father is it more than $1 million earned by your stock broker father?

Anon, do you mean that you would be taking over the book of business?  Otherwise, I think Newbie's right.  $1mm is $1mm in the bank account.

I think he's trying to imply that successful insurance brokers have/make more money than stock brokers? (I don't know whether this is true or not).

I will say that the successful insurance producer probably has more insurance inforce though , therefore making him/her the clear winner in 2nd generation wealth.

[quote=knucklehead][quote=vbrainy]

knucklehead is a good handle for you, but I like wasteofskin better.

A Financial Advisor can work in many channels, the bank is just one example.

Did you know you can be a LPL rep and work in a bank? dork

[/quote]

May I suggest you carefully read what I wrote so you don't have to prove to the world that you are a moron? By the way...your mom needs a bath. Sorry.

[/quote]

Great comeback.  I think you missed your calling.  You should be in showbiz--you would make a great clown.

"I will say that the successful insurance producer probably has more insurance inforce though , therefore making him/her the clear winner in 2nd generation wealth."

Dude, that is exactly what I meant.

[QUOTE]Note, by the way, that all this 'wealth creation in real estate'
talk is coming at the tail end-or just after the peak-of an incredible five-
year bull market in real estate. I would gladly bet those 10 million dollar
net worth clients were worth a lot less 5-6 years ago. Too, in 1999, we
were all talking about the 'new economy' and the true heart of wealth
creation was in Silicon Valley, venture funds, and the internet.The more
things change the more they stay the same, a wise man once said.[/
QUOTE]

That my friend is where you, and me until the past year, are missing
the boat. The bull market you speak of is the environment where any
idiot can buy an already overpriced house, hold it for six months, and
then it for a just about guaranteed profit. I agree, that is a residential bull
market.

HOWEVER...a couple things.

First of all, I live in the Southeast, and we never experienced the bull
market you speak of to the extent the Northeast, California, etc (with the
exception of FL, which is altogether it's own animal)...prices have steadily
inclined on existing construction (older, established neighborhoods), with
a lot of new construction coming up daily.

Secondly, EVEN IF PRICES STAYED CONSTANT, i.e didn't rise 6-8%
annually as they have in my area, what do you think it costs a BUILDER to
build a house versus it's true value (relative to comps in a given area)? [/
P]

I tell you. At most price points, whether were are talking about a
$250,000 house, or a $2,500,000, the avg builder will net 25-30% of
the selling price as profit.

30%, even if the market doesn't move an inch.

Of course their are some risks, and that is why the smart builders (IMO)
are staying where the highest demand is....1500 to 2500 sq ft, middle
income style houses that look good, are nice, and sell quick.

I see it every day...as I said, my bank caters to these folks ALOT.

I would agree with the statement that financial advisors are horrible investors or savers of their own money.  My experience is that way to many have a gambling nature and are making wild bets on micro-cap stocks.  Not all but I’ve seen a good number doing just that.

As for becoming wealthy via the stock market - it can happen but simply put, you need money to make money.  I could invest $300k now and be very well off in 50 years but how many 20 year olds have that kind of money without taking massive leverage?  That’s why real estate works.

I do have clients who became rather wealthy via the stock market.  We looked through our book of clients back in the late '90s and found every one of them did it via small bank stocks and consumer goods.  We’ve had multi million dollar accounts who were mostly invested in Ralston Purina, Anheuser Busch and Emerson Electric (yes I’m in St. Louis area).  I’ve also had them with BAC and C because they had significant investment dollars in small regional banks and very small insurance companies that were gobbled up a few times.

I disagree with this totally. More people "get rich" in the stock market than real estate and here is the way it is done.

1.Lets say you work at a private company that is now coming public. The private shareholders who  have a low cost basis suddenly are multi-millionaires. This is assuming that they are able to sell their stock when the lockup period ends. I remember I counted at least 20 people in the homstore.com secondary offering that sold more than a million dollars in stock  @110 a share. (now 4). This happens all the time

2. Venture capital people who are in these companies before they become public

3. You get lucky(as many did in Real estate) and you company does well and you work there for 20 years. ex MO

4. You get lucky and work at a company that goes up and you get stock options and sell. ex AOL or any tech stock during the bubble. Then of course talk to an investment professional, like ourselves, to explain to you that you need to diversify out of tech,real estate  or whatever you made your money in to preserve your wealth.

5. You get a client, and hopefully yourself, to follow a disciplined plan of savings and debt reduction to achieve a million + dollars.

What we do is preserve wealth. We are not going to find the stock that makes someone a million. Im sure it happens sometimes but if we did it is usually luck and not our pick that did it.

One last thought on real estate. If you bought a house for 500k, borrowed 500 and it went to one million in ten years. How much did you really gain. 500k X 6%=30k a year X 10=300k total cost 800k. Yes I know you get a deduction on the interest, but you also pay taxes and insurance. 2500 a month(30k a year) for the same 10 year period into New Perspective fund would be 503000 dollars. Granted you can live in the house but this is for illustration purposes. By the way what if the house did not double or WENT DOWN.

Lastly, simply save 10% of what you make and do it for 20 years and keep your debt levels normal and you will have a million + dollars.

It seems the common ingredient for both real estate and equity success is time. You know the old quote… it’s not timing the market, it’s time in the market.

[quote=aldo63]

I disagree with this totally. More people "get rich" in the stock market than real estate and here is the way it is done.

1.Lets say you work at a private company that is now coming public. The private shareholders who  have a low cost basis suddenly are multi-millionaires. This is assuming that they are able to sell their stock when the lockup period ends. I remember I counted at least 20 people in the homstore.com secondary offering that sold more than a million dollars in stock  @110 a share. (now 4). This happens all the time

What % of the population actually gets the opportunity the participate in something like this, and at that level?

2. Venture capital people who are in these companies before they become public

Again, an ULTRA SMALL portion of the overall population does not make for an accurate example.

3. You get lucky(as many did in Real estate) and you company does well and you work there for 20 years. ex MO

Sure you can sock away money for 20 years and (hopefully)build up a decent nest egg.  That's not the point.  The point is I have seen guys go from VERY AVG to net worths well over a million buck IN JUST A FEW YEARS through real estate building and development.

4. You get lucky and work at a company that goes up and you get stock options and sell. ex AOL or any tech stock during the bubble. Then of course talk to an investment professional, like ourselves, to explain to you that you need to diversify out of tech,real estate  or whatever you made your money in to preserve your wealth.

AGAIN, vast minority.

5. You get a client, and hopefully yourself, to follow a disciplined plan of savings and debt reduction to achieve a million + dollars.

What we do is preserve wealth. We are not going to find the stock that makes someone a million. Im sure it happens sometimes but if we did it is usually luck and not our pick that did it.

One last thought on real estate. If you bought a house for 500k, borrowed 500 and it went to one million in ten years. How much did you really gain. 500k X 6%=30k a year X 10=300k total cost 800k. Yes I know you get a deduction on the interest, but you also pay taxes and insurance. 2500 a month(30k a year) for the same 10 year period into New Perspective fund would be 503000 dollars. Granted you can live in the house but this is for illustration purposes. By the way what if the house did not double or WENT DOWN.

See my point?  Why is it that so many folks in THIS field cannot grasp the notion that something (a house) can be worth much more than the sum of its parts? 

Builders don't build houses for $500,000 and sell them for $500,000...why is that SO difficult for stock minded folks to understand?

Lastly, simply save 10% of what you make and do it for 20 years and keep your debt levels normal and you will have a million + dollars.

What if you only make 6.25/hr?  If I save 10% of that, will I have a million dollars at the end of twenty years? Try to refrain from silly blanket statements.

[quote=BankFC][quote=aldo63]

I disagree with this totally. More people "get rich" in the stock market than real estate and here is the way it is done.

1.Lets say you work at a private company that is now coming public. The private shareholders who  have a low cost basis suddenly are multi-millionaires. This is assuming that they are able to sell their stock when the lockup period ends. I remember I counted at least 20 people in the homstore.com secondary offering that sold more than a million dollars in stock  @110 a share. (now 4). This happens all the time

What % of the population actually gets the opportunity the participate in something like this, and at that level?

2. Venture capital people who are in these companies before they become public

Again, an ULTRA SMALL portion of the overall population does not make for an accurate example.

3. You get lucky(as many did in Real estate) and you company does well and you work there for 20 years. ex MO

Sure you can sock away money for 20 years and (hopefully)build up a decent nest egg.  That's not the point.  The point is I have seen guys go from VERY AVG to net worths well over a million buck IN JUST A FEW YEARS through real estate building and development.

4. You get lucky and work at a company that goes up and you get stock options and sell. ex AOL or any tech stock during the bubble. Then of course talk to an investment professional, like ourselves, to explain to you that you need to diversify out of tech,real estate  or whatever you made your money in to preserve your wealth.

AGAIN, vast minority.

5. You get a client, and hopefully yourself, to follow a disciplined plan of savings and debt reduction to achieve a million + dollars.

What we do is preserve wealth. We are not going to find the stock that makes someone a million. Im sure it happens sometimes but if we did it is usually luck and not our pick that did it.

One last thought on real estate. If you bought a house for 500k, borrowed 500 and it went to one million in ten years. How much did you really gain. 500k X 6%=30k a year X 10=300k total cost 800k. Yes I know you get a deduction on the interest, but you also pay taxes and insurance. 2500 a month(30k a year) for the same 10 year period into New Perspective fund would be 503000 dollars. Granted you can live in the house but this is for illustration purposes. By the way what if the house did not double or WENT DOWN.

See my point?  Why is it that so many folks in THIS field cannot grasp the notion that something (a house) can be worth much more than the sum of its parts? 

Builders don't build houses for $500,000 and sell them for $500,000...why is that SO difficult for stock minded folks to understand?

Lastly, simply save 10% of what you make and do it for 20 years and keep your debt levels normal and you will have a million + dollars.

What if you only make 6.25/hr?  If I save 10% of that, will I have a million dollars at the end of twenty years? Try to refrain from silly blanket statements.

Q How many people are builders.

A a vast minority. Do you really think they are all rich. Some are so highly leveraged they could lose it all very quickly

Q how many buiders are there when the real estate market goes down.

A smaller minority

Fact- if you only make 6.25 an hour, you will not make money in real estate or the stock market. Invest in yourself for education, By the way when I made 18000 a year when I started as a broker in 1989. i invested 300 a month in mutual funds(american funds). I still do that. It is now 130k from that alone. I have much more than that

Q Do you know how many builders lost everything in the late 1980 early 1990's. Do you realize the house they sell for 700 that they built for 500 is great. What about the spec house(s) they cannot sell. I was talking about personal residence in my example

A. many. leverage will kill these people when the market goes down

Lastly, propsect these builders, open accounts, show them the history of the market and real estate and explain divesification to them. Explain to them how the tech bubble blew up and how me, you and others in this business with net worths currently less than them can help them.

[quote=aldo63]

Q How many people are builders.

A a vast minority. Do you really think they are all rich. Some are so highly leveraged they could lose it all very quickly

No, I don't think the minority of people are builders.  That would make no sense logically.  Also why it's such a great business to be in.

Q how many buiders are there when the real estate market goes down.

A smaller minority

You need to turn off the TV (and the talking heads of doom and gloom) and look around you.  No real estate bubble here in Southeast overall (every thing has an exception SOMEWHERE).  Plus demand for the $150,000-$300,000 house is STRONG.

Fact- if you only make 6.25 an hour, you will not make money in real estate or the stock market. Invest in yourself for education, By the way when I made 18000 a year when I started as a broker in 1989. i invested 300 a month in mutual funds(american funds). I still do that. It is now 130k from that alone. I have much more than that

Congratulations.  I will make more on the three spec houses me and my partner (a GC w/20 years experience) are building over the next six months than you have investing since 1989.  And yes, this has been disclosed as an outside business activity thank you.

Q Do you know how many builders lost everything in the late 1980 early 1990's. Do you realize the house they sell for 700 that they built for 500 is great. What about the spec house(s) they cannot sell. I was talking about personal residence in my example

A house not selling quickly is OBVIOUSLY a risk.  You (actually, I) am mitigating the risk by

1)  Building houses at high demand price points

2)  Building in desirable locations

3)  Being EXTREMELY diligent regarding budget/bids, timetables, change orders, expenses in general, etc

A. many. leverage will kill these people when the market goes down

Lastly, propsect these builders, open accounts, show them the history of the market and real estate and explain divesification to them. Explain to them how the tech bubble blew up and how me, you and others in this business with net worths currently less than them can help them.

Honestly, I admire you seemingly genuine zest for the fundamentals of this business, and it sounds like you would work well with the folks who need assistance with fundamental investing.

My last response.

quit the investment business and go into real estate or maybe the mortgage business. 

you are smart, i am dumb

real estate is the only place to make money .

Debt is great

the inventory in houses is just a tv thing

the over leveraged nation will increase their net worth 20% next year from appreciation in real estate

lu was a steal when it dropped to 50, so was csco, emc, intc, homs, arba, bway,crfh,artd,clic,ect

live long and prosper

[quote=aldo63]

My last response.

quit the investment business and go into real estate or maybe the mortgage business. 

Why not do both financial advising and real estate?  Can't be both?

you are smart, i am dumb

I don't question your intelligence.  Just sometimes folks can't see the forest for the trees.

real estate is the only place to make money .

I never said that...I contend that for someone who has the inclination, opportunity, and funds, real estate building and development is a QUICKER way to build wealth versus plunking  $1000 a month into a mutual fund. 

Debt is great

As a tool, it can be.    Did you pay for your house in cash?  Ever meet a small business owner that used SBA/home equity/whatever to start a small business.

the inventory in houses is just a tv thing

Probably not everywhere, but not like they make it out to be.

the over leveraged nation will increase their net worth 20% next year from appreciation in real estate

No, not from your own house.  Obviously you are STILL missing the point, which shows you are either being close minded, or you simply cannot grasp what I am saying.

lu was a steal when it dropped to 50, so was csco, emc, intc, homs, arba, bway,crfh,artd,clic,ect

Don't get the relevance of this comment.  Care to elaborate?

live long and prosper

Are you a trekkie?    You do as well.

Do the wirehouses frown on brokers if they try and do some real estate development work on the side?  It almost seems like a natural progression for some, and if you have clients that are willing to invest in your projects…

[quote=futureadvisor]Do the wirehouses frown on brokers if they try and do some real estate development work on the side?  It almost seems like a natural progression for some, and if you have clients that are willing to invest in your projects…[/quote]

Yes they do.  They generally frown on brokers who make money on ANYTHING other than working for them.

As long as it doesn't take away from meeting production goals, and is not a conflict of interest in some way with the bank or the client, then it should be okay.

I am producing above my goal, and what time I spend on outside activities is in excess of the 8-5 I put in at the bank.

Yes, I work 8-5.  That's one of the reasons why I came to a bank, for better working conditions.  It has given me the opportunity to have a life again for one, and to do other things for two.

[quote=BankFC]

As long as it doesn’t take away from meeting production goals, and is not a conflict of interest in some way with the bank or the client, then it should be okay.

I am producing above my goal, and what time I spend on outside activities is in excess of the 8-5 I put in at the bank.

Yes, I work 8-5.  That's one of the reasons why I came to a bank, for better working conditions.  It has given me the opportunity to have a life again for one, and to do other things for two.

[quote=BankFC]

I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.

Most made money in 1 of 2 ways.  Self employed business owner or real estate.

The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.

That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.[/quote]

You are correct.  That is why, when I meet young clients (I'm under 30 still - barely) and they ask about the best way to accumulate wealth, I tell them that if they have the start up capital ($10k to get started) and willing to learn and risk tolerance, then by far, real estate is the way to go.  All because of two things 1) cheap money and 2) leverage.

I personally own 5 properties including my own.  RE is a hard deal to beat.  I'd much rather get just an average THREE percent return on my money in RE, than an average 11% return in the markets.  Why?  Leverage.  I only had to put down 10%.  So that 3% return, was actually 30%.  And my renters pay my debt service completely.  And don't forget the tax benefits of having rental props.

And you are right...the development business is an even better return (I own a few books on this and am meetin people in that industry whenever possible). 

The past is littered with the corpses of "can't lose" propositions and real estate isn't looking too healthy, right now.

Also, stocks won't call you at 3AM to say that the toilet is overflowing. Bonds won't cram 6 people into a living space ideally suited for just 2. And neither one will trash the place, either.

Furthermore, let's make sure you don't buy a place with structural defects and mold.

I'll take owning securities over real estate.

[quote=doberman]The past is littered with the corpses of “can’t lose” propositions and real estate isn’t looking too healthy, right now.

Also, stocks won't call you at 3AM to say that the toilet is overflowing. Bonds won't cram 6 people into a living space ideally suited for just 2. And neither one will trash the place, either.

Furthermore, let's make sure you don't buy a place with structural defects and mold.

I'll take owning securities over real estate.[/quote]

Yes, it sometimes isn't easy.  But again, it takes intelligence and (surprise) a long-term outlook.  Your concerns are common among those who have not invested in real estate.  But from real experience I can tell you not once in two years has a toilet ever over-flowed.  Noe one has ever called me in the middle of the night. The worst call has been a malfunctioning  a/c internal unit...but that is why you buy home warranties for $20/month on each property.  I buy in nice upper-middle class neighborhoods too.  I carefully screen my tenants and require large deposits.  I schedule quarterly inspections of each property to insure everything is going smoothl.  I buy for the long-term (10+ years) and could care less what the real estate market does this particular year.  You see...it's like building an advisory business.  You have a plan and you work your plan.

And, like I said...bring on the *measly* 3 (30) percent appreciation years.  Yeah, it's worth it.  As I said, the original poster made a good observation.  Over 50% of the wealth in this country is built through real estate.  I was lucky to have learned this and acted on it at an early age.

[quote=doberman]

Also, stocks won't call you at 3AM to say that the toilet is overflowing. Bonds won't cram 6 people into a living space ideally suited for just 2. [/quote]

Btw...you would use bonds to "accumulate wealth"?  That is what I said real estate is used for.  To me, RE is not liquid enough to be used in retirement to any great deal, for income.  Also, 12% on a good year for stocks vs. 30% on a bad year (yeah, where I own RE that would be a bad year - and I'm talking long-term historically, not just the irrational last 5 years of RE bull market)?  And you get very nice tax benefits with the rental props.  Again, the picture starts to paint itself.

Lastly, I was shocked at your post.  I looked at a lot of your historical posts on other threads and you seemed so intelligent in those threads.

I can tell you being a landlord is a waste. I own two rental properties (Both for sale)and my family owns many, if I had invested the money in a REIT or RE MF I would be far better off today without the headaches of city inspections/fees, tenants, vacancies, etc. I agree maintenance is not a huge issue, but when it comes time to raise the rent it seems like taxes or insurance rise faster than the increase in rents.



Also our parents spend considerable amounts of time on maintaining properties it pretty much consumes their lives, they cannot go on vacation without worrying, they are in court battles at least once or twice per year and constantly showing a house or apartment. I know someone is going to chime in with that is what property managers are for. Obviously you have never had the experience of owning rentals. They will do much of this and take 10% off the top, they do not care about you or your property they only care about their 10% so they stick in crappy tenants, find laborers who do shottty jobs and overpay (Probably getting kickbacks) Property managers- No Way and we’ve dealt with many!

I use all of my real estate holdings for immediate cash flow.  I'm not into flipping properties mainly because I am not into construction, etc.  My stocks are used for retirement and wealth building.  The bulk of my net worth though is in real estate.  I believe a truly balanced financial portfolio is underscored with balanced real estate holdings (not too heavy in any one type of property) and a balanced securities portfolio and then maintaining balance between the both of them...

I understand the misfortunes of real estate as well...I lost EVERY property I owned to Hurricane Katrina and Hurricane Rita, just a year or two after Ivan took my condo in Florida...  But by and far Real Estate is still the best investment long term (in my humble opinion) and I would suggest to anyone trying to get into that business to put away the paralysis of analysis and after talking to some professionals to just get out there and do it!  Just like you did with stocks...

[quote=bankrep1]I can tell you being a landlord is a waste. I own two rental properties (Both for sale)and my family owns many, if I had invested the money in a REIT or RE MF I would be far better off today without the headaches of city inspections/fees, tenants, vacancies, etc. I agree maintenance is not a huge issue, but when it comes time to raise the rent it seems like taxes or insurance rise faster than the increase in rents.

Also our parents spend considerable amounts of time on maintaining properties it pretty much consumes their lives, they cannot go on vacation without worrying, they are in court battles at least once or twice per year and constantly showing a house or apartment. I know someone is going to chime in with that is what property managers are for. Obviously you have never had the experience of owning rentals. They will do much of this and take 10% off the top, they do not care about you or your property they only care about their 10% so they stick in crappy tenants, find laborers who do shottty jobs and overpay (Probably getting kickbacks) Property managers- No Way and we've dealt with many!

[/quote]

You are right about prop managers...I find them expensive and ineffective, so i have never used them.  I have heard of your parents' plight many times.  I was afraid of that and that is why I only invested in very good areas and with quality tenants.  Not ONCE in 2 years have I been through court battle or even had to evict anyone...never.  But then again, my rentals are worth an average of $225,000 each and the rent is around $1250, automatically requring higher quality tenants.

Disclaimer:  Using the ManDate Real Estate Investment Course does not guarantee you positive retursn.  Individual results may vary.

They have several in a college town, high rents/profits = more headaches than the others, but all still have there fair share.

[quote=ManDate][quote=doberman]

Also, stocks won't call you at 3AM to say that the toilet is overflowing. Bonds won't cram 6 people into a living space ideally suited for just 2. [/quote]

Btw...you would use bonds to "accumulate wealth"?  That is what I said real estate is used for.  To me, RE is not liquid enough to be used in retirement to any great deal, for income.  Also, 12% on a good year for stocks vs. 30% on a bad year (yeah, where I own RE that would be a bad year - and I'm talking long-term historically, not just the irrational last 5 years of RE bull market)?  And you get very nice tax benefits with the rental props.  Again, the picture starts to paint itself.

Lastly, I was shocked at your post.  I looked at a lot of your historical posts on other threads and you seemed so intelligent in those threads.

[/quote]

My wife owned rental property when we married. My complaints with rental real estate is from actual experience. My wife offered below- market rent to people she thought had good character: teachers, etc. What we ultimately found out was that they were human garbage who took advantage of her good nature. I convinced her to dump their *sses on the street and sell the properties, which she did.

I know several affluent people who made their fortune owning real estate. Their properties were mostly "shotgun shacks". However, I won't rent out shacks and I won't rent to human garbage, so we invest in stocks instead.

Suffice it to say that real estate ain't my thang!

[quote=bankrep1]I can tell you being a landlord is a waste. I own two
rental properties (Both for sale)and my family owns many, if I had
invested the money in a REIT or RE MF I would be far better off today
without the headaches of city inspections/fees, tenants, vacancies,
etc. I agree maintenance is not a huge issue, but when it comes time
to raise the rent it seems like taxes or insurance rise faster than the
increase in rents. [/quote]



I love REITs, all the benefits of real estate, w/o any of the
headaches. Trouble is everyone else has figured this out for the past
few years, so that a cheap investable REIT is hard find these days.

I speak from experience too having been in the real estate business for about 15 years.  You may not realize it now, but real estate management does nothing but take away time and resources from your primary money maker, which is your investment advisory business.  I am in the process of almost completely exiting the real estate business, selling all but an overnight cabin rental in a regional tourist trap.

Sure, you'll make money using real estate leverage, but you'd make more if you weren't screwing with real estate and were instead focusing on your primary business, which from my experience has much much MUCH more income potential than a few crappy rental properties.

Think you do a good job screening rental candidates and you're thus bullet-proof?  I did too with my fancy 8-page application including employment verification and credit check until my worst tenant nightmare ever...a medical lab manager with good income and impeccable credit.  She destroyed one of my properties...let a cat sh*t and piss everywhere (even though my contract says NO PETS), left raw chicken in a closet, close to a hundred blood and urine specimins boxed in a corner, and too many other horrors to mention here.  Yes, eventually, I got all my loss out of her on the installment plan, including her footing the bill to completely recover all floors, but in no way was it worth the time and aggravation I went through to resolve the problem.

Have I made money in the real estate business?  Absolutely.  Was it worth it?  I'll give you a HELL NO!  You want real estate?  Buy a good REIT or REIT fund, or at most, a share of a private real estate partnership, where someone else worries about the day to day operational sh*t.  You may have not hit the wall of regret yet, but I'd be surprised if you didn't.  For me, it took about 7-8 years, but I've hated it ever since and the happiest day of my life will be when I get completely out of this business and am able to focus my efforts where the most money is to be made.

[quote=kristoffurpol]

I use all of my real estate holdings for immediate cash flow.  I’m not into flipping properties mainly because I am not into construction, etc.  My stocks are used for retirement and wealth building.  The bulk of my net worth though is in real estate.  I believe a truly balanced financial portfolio is underscored with balanced real estate holdings (not too heavy in any one type of property) and a balanced securities portfolio and then maintaining balance between the both of them…

I understand the misfortunes of real estate as well...I lost EVERY property I owned to Hurricane Katrina and Hurricane Rita, just a year or two after Ivan took my condo in Florida...  But by and far Real Estate is still the best investment long term (in my humble opinion) and I would suggest to anyone trying to get into that business to put away the paralysis of analysis and after talking to some professionals to just get out there and do it!  Just like you did with stocks...

[quote=Indyone]

Have I made money in the real estate business?  Absolutely.  Was it worth it?  I'll give you a HELL NO!  You want real estate?  Buy a good REIT or REIT fund, or at most, a share of a private real estate partnership, where someone else worries about the day to day operational sh*t.  You may have not hit the wall of regret yet, but I'd be surprised if you didn't.  For me, it took about 7-8 years, but I've hated it ever since and the happiest day of my life will be when I get completely out of this business and am able to focus my efforts where the most money is to be made.

[/quote]

That's just like Indyone. Ya' never know where he stands on a subject. Always wafflin' and never stickin' to any particular side.

C'mon Indy, tell us how you really feel!

…I didn’t want anyone to be confused…my opinion is that most of us, particularly in this high-potential field, shouldn’t be screwing with a bunch of real estate…personally, it messes with my focus and in the end, I believe it costs me more than it makes me…

I must admit, I am sure if I were completely focused on my investment advisory business, I would be much more than "above goal."  I don't think I'd want to be in the rental business.

I am staying in the new construction business as a side endeavor, but much more "hands-off" lately...but if I had a family (wife/kids) there would be no way I could do both.

The only real estate investing I due these days is into an International Realty fund I bought into about 11 months ago. Up about 34% since then, and going STRONG....

I figure I can take the growth in about 6-8 months, place a down payment, and get into one of those condos near the beach that are falling 5% in price per quarter... Nice...

No question REITs have done well this year, however, you can’t compare

an investment in REITs with traditional real estate ownership. The beauty

of real estate is the leverage you can use. $100K of capital can control

$1M worth of dirt.



90% of the HNW people I meet tell me they’ve made their money in real

estate or stock options, not in the market and certainly not dollar-cost-

averaging. The other 10% inherited it.



I am not adding to my stock portfolio in 2007, instead, I am pooling

funds with a couple of other investors to buy properties in pre-

foreclosure and non-performing loans from banks.

I've got some real estate I'd be happy to sell to you...

Actually...I'm glad you like real estate...gives me hope that some sucker...oops...I mean buyer...will soon snap up my prime real estate also...

[quote=skeedaddy2]No question REITs have done well this year, however, you can't compare
an investment in REITs with traditional real estate ownership. The beauty
of real estate is the leverage you can use. $100K of capital can control
$1M worth of dirt.

[/quote]

This is what, for some reason, no one here on this forum can understand.  Btw...went cold walking today to meet business owners.  Met 8 owners.  4 only invest in real estate (one owns 135 houses and started 30 years ago).

MD, I follow the leverage principal, and I won't tell you that I didn't make money in real estate, but I don't think it's the panacea that everyone makes it out to be.  Repair costs (I'm getting ready to write a $20,000+ check for repairs and remodeling to property worth about $80,000), insurance, property taxes (currently 2.5% of FMV annually), interest, etc. all add up and cause significant dilution to all of that leverage, and for my part, the headaches I've experienced over the years make it not worth it.  By the time I hit 60, I'll have amassed considerably more wealth in this business than virtually all of the local landlords in my market and I'll have done it doing something I love...not something I've come to resent.

Incidentally, my realtor, who has 40+ properties is singing the blues about how crappy the business has become with high property taxes, etc.  He told me last month that the property market is so crappy, he feels like he has to hang on for better times to avoid taking a beating.

Interesting...a professional who's been investing in real estate for longer than I have (15+ years) wants out...hmmmmm...

One more random thought...some of the worst loan losses I ever saw when I was at the bank back in the 90's was rental home loans.  Often the bank would get 10-20 houses at a time and they were just disasters...some no longer habitable.  I remember the loan guys really clamping down on the easy money after that.  Unfortunately, it appears that this lesson will one day be repeated as the real estate cycle has not been repealed...

Speaking of buying foreclosures, don't make the mistake my ex-friend made: buying foreclosures from finance companies. Mortgage loans that originated through finance companies are typically based on overvalued property. The reason for this is that appraisers for finance companies are encouraged to inflate the value of the appraisal (if necessary) to make the loan. If they don't, the finance company finds an appraiser who will.

I guess my philosophy is that debt can hurt you. I had a rental that I sold before the increase in the RE market. I owned it for 10 years and sold it for a 4000 dollars profit. That was ok, except I depreciated for 10 years and had to recapture the capital gains. I have no real estate holding except my house, which is paid off. Some people say that is stupid. I tell them that the only people who tell me that paying off my house is stupidis people that don't have their houses paid for. I put money in the market when I made 20k and I do it 200k. I believe in what I do for a living and am living proof that saving money can make you affluent, maybe not ultrahigh net worth, but what is high net worth. AT MS, my former company, my account would be considered platinum. I listen to all these people that have moved into larger houses with no money down and libor rate loans and they are now crying the blues. What will happen if the real estate market drops 10% or 20%? I has happened before. What about a tax law change, that can happen also. Many people have used their houses as ATM's for years, this is scary. When I bought my current house, in 1993, you had to put10% down. whatever happend to that? Just read the forclosure pages and them tell me everyone makes money in Real Estate. Also I just did a hypo for a client who say Real estate in the only investment.

500 a month into ICA for 20 years =480k.

50k with no additions was about the same

50k adding 500 a month was about 900k.

and your saying dollar cost averaging does not work?

I guess I’ll take you seriously when you say that you opened an account with

someone who has DCA’d ICA for 20 years. Until then, let’s stay on

point…shall we?



DCA (thank you Suzy Orman) is a device originated by the mutual fund

industry to convince the “average joe” to keep sending a portion of their

earnings to Boston, NY or San Francisco.



The bottom line is: most (90%) HNW clients have become HNW by either

liquidating real estate or cashing-in stock options.

[quote=Indyone]

MD, I follow the leverage principal, and I won’t tell you that I didn’t make money in real estate, but I don’t think it’s the panacea that everyone makes it out to be.  Repair costs (I’m getting ready to write a $20,000+ check for repairs and remodeling to property worth about $80,000), insurance, property taxes (currently 2.5% of FMV annually), interest, etc. all add up and cause significant dilution to all of that leverage, and for my part, the headaches I’ve experienced over the years make it not worth it.  By the time I hit 60, I’ll have amassed considerably more wealth in this business than virtually all of the local landlords in my market and I’ll have done it doing something I love…not something I’ve come to resent.

Incidentally, my realtor, who has 40+ properties is singing the blues about how crappy the business has become with high property taxes, etc.  He told me last month that the property market is so crappy, he feels like he has to hang on for better times to avoid taking a beating.

Interesting...a professional who's been investing in real estate for longer than I have (15+ years) wants out...hmmmmm...

One more random thought...some of the worst loan losses I ever saw when I was at the bank back in the 90's was rental home loans.  Often the bank would get 10-20 houses at a time and they were just disasters...some no longer habitable.  I remember the loan guys really clamping down on the easy money after that.  Unfortunately, it appears that this lesson will one day be repeated as the real estate cycle has not been repealed...

[quote=aldo63]

Also I just did a hypo for a client who say Real estate in the only investment.

500 a month into ICA for 20 years =480k.

50k with no additions was about the same

50k adding 500 a month was about 900k.

and your saying dollar cost averaging does not work?[/quote]

Client invested $50k with no additions.  Comes to around $450k in ICA.

Instead of this, client takes same $50k and buys a $500,000 house.  RE market anually averages 6% (national historical compounded average). 

1st year - client makes $30k
2nd year - client makes $32k
3rd year - client makes $34k
4th year - client makes $36k
5th year - client makes $38k  (house valued at $670k now)
6th year - client makes $40k
7th year - client makes $42.5k
8th year - client makes $45k  797.50
9th year - client makes $48k
10th year - client makes $50k (house valued at $895.5k now)

And this is just 10 years with the national average appreciation rate of 6 percent. 

SUMMARY
------------------------

Client invested $50k.  Lowest return client ever made on $$ was in first year (60%).  After just TEN years (not TWENTY), client has made $495,000 PLUS gets back the original $50,000 upon sale of the house PLUS, as long as they did not have an interest only mortgage, a lot of principal was paid down as well.

That, my friends, is the power of leveraging.  For fun, you could take it to 20 years.  Like I said, give me THREE percent a year in the RE market over 12 percent in the stock market.  I believe in what I do - but only for the right clients...young clients that have SOME money, understand the risk and are willing to learn, I will point them in this direction.

http://money.cnn.com/2006/03/28/news/economy/millionaires/

"Although real estate is not their sole source of wealth, it remains a staple for many. Forty-six percent of those surveyed own investment real estate like a second home or rental properties.

Seventy percent of the households, meanwhile, owned stocks and bonds, and 68 percent owned mutual funds."

...doesn't exactly support the 90% assertion.

"The growth we've seen this year is largely due to measured planning and active reinvestment," Luhr said in a statement. "When asked about their investment approach over the past year, 61 percent of millionaires said their approach has changed very little, indicating they have a strategy and they are sticking to it."

That includes maintaining and monitoring a diversified portfolio, Luhr said, and also taking advantage of low interest rates to refinance and pay down debt."

That's from this related link:

http://money.cnn.com/2005/09/27/news/economy/millionaire_sur vey/index.htm

Note that only 46% even owned investment real estate and nowhere does it say that the majority of even these folks made their fortunes in real estate.

Many of the millionaires in my market own their own business(es) and beyond what's in the company and their personal residence, own very little real estate.  Many more have had long tenures in high-paying jobs (although I see little in the way of stock options as very few local companies are publicly traded).  Sorry, guys...I'm just not seeing it here...

[quote=Indyone]Repair costs (I'm getting ready to write a $20,000+ check for repairs and remodeling to property worth about $80,000), insurance, property taxes (currently 2.5% of FMV annually), interest, etc. all add up and cause significant dilution to all of that leverage...[/quote]

Again...I repeat myself...

[quote=ManDate]

[quote=aldo63]

Also I just did a hypo for a client who say Real estate in the only investment.

500 a month into ICA for 20 years =480k.

50k with no additions was about the same

50k adding 500 a month was about 900k.

and your saying dollar cost averaging does not work?[/quote]

Client invested $50k with no additions.  Comes to around $450k in ICA.

Instead of this, client takes same $50k and buys a $500,000 house.  RE market anually averages 6% (national historical compounded average). 

1st year - client makes $30k
2nd year - client makes $32k
3rd year - client makes $34k
4th year - client makes $36k
5th year - client makes $38k  (house valued at $670k now)
6th year - client makes $40k
7th year - client makes $42.5k
8th year - client makes $45k  797.50
9th year - client makes $48k
10th year - client makes $50k (house valued at $895.5k now)

And this is just 10 years with the national average appreciation rate of 6 percent. 

SUMMARY
------------------------

Client invested $50k.  Lowest return client ever made on $$ was in first year (60%).  After just TEN years (not TWENTY), client has made $495,000 PLUS gets back the original $50,000 upon sale of the house PLUS, as long as they did not have an interest only mortgage, a lot of principal was paid down as well.

That, my friends, is the power of leveraging.  For fun, you could take it to 20 years.  Like I said, give me THREE percent a year in the RE market over 12 percent in the stock market.  I believe in what I do - but only for the right clients...young clients that have SOME money, understand the risk and are willing to learn, I will point them in this direction.

Astute investors would never limit themselves to only one type of asset… They would own Real Estate, Stocks, Munis at the very least…

Are you people just plain fools? Or are you high on the Kool-Aid?



Can anyone please site an example of a HNW client that rented their whole

life and made their fortune trading stocks or bought a VA when they were 12

years old?



Okay children, now back to bed

[quote=joedabrkr] [quote=ManDate]

[quote=aldo63]

Also I just did a hypo for a client who say Real estate in the only investment.

500 a month into ICA for 20 years =480k.

50k with no additions was about the same

50k adding 500 a month was about 900k.

and your saying dollar cost averaging does not work?[/quote]

Client invested $50k with no additions.  Comes to around $450k in ICA.

Instead of this, client takes same $50k and buys a $500,000 house.  RE market anually averages 6% (national historical compounded average). 

1st year - client makes $30k
2nd year - client makes $32k
3rd year - client makes $34k
4th year - client makes $36k
5th year - client makes $38k  (house valued at $670k now)
6th year - client makes $40k
7th year - client makes $42.5k
8th year - client makes $45k  797.50
9th year - client makes $48k
10th year - client makes $50k (house valued at $895.5k now)

And this is just 10 years with the national average appreciation rate of 6 percent. 

SUMMARY
------------------------

Client invested $50k.  Lowest return client ever made on $$ was in first year (60%).  After just TEN years (not TWENTY), client has made $495,000 PLUS gets back the original $50,000 upon sale of the house PLUS, as long as they did not have an interest only mortgage, a lot of principal was paid down as well.

That, my friends, is the power of leveraging.  For fun, you could take it to 20 years.  Like I said, give me THREE percent a year in the RE market over 12 percent in the stock market.  I believe in what I do - but only for the right clients...young clients that have SOME money, understand the risk and are willing to learn, I will point them in this direction.

[/quote]

Mandate-

Your rosy scenario is lovely, but you forgot to include a few minor items like real estate taxes and repairs.

Also-just curious how that leverage works out if the home drops in value by 10% per year for the first 3-4 years?
[/quote]

Repairs are covered by home warranties, for the most part...$25k/month/house ($300/year/house).  Just to be on the safe side, though (so the warranty company doesn't try to back out) I get yearly A/C and roof inspections ($220/year/house).

Taxes are not an issue as they are part of the debt service that is more than covered by the rent checks.  As taxes (and insurance) go up, so do the rent payments (and yes, they will be going up for sometime around here---all real estate is local---because we had over 5000 condo conversions in the last 5 years -- no I am not in SE Florida). 

The area of the country I am in has NEVER experienced even one year of 10% loss in RE values.  The worst was a little over 5%.  The next year it recovered to positive 1% and then back on track again.  Those were the anomalies.

Then go into the real estate business full time.  A guy like you is far too smart for the securities business anyway.

[quote=ManDate][quote=joedabrkr] [quote=ManDate]

[quote=aldo63]

Also I just did a hypo for a client who say Real estate in the only investment.

500 a month into ICA for 20 years =480k.

50k with no additions was about the same

50k adding 500 a month was about 900k.

and your saying dollar cost averaging does not work?[/quote]

Client invested $50k with no additions.  Comes to around $450k in ICA.

Instead of this, client takes same $50k and buys a $500,000 house.  RE market anually averages 6% (national historical compounded average). 

1st year - client makes $30k
2nd year - client makes $32k
3rd year - client makes $34k
4th year - client makes $36k
5th year - client makes $38k  (house valued at $670k now)
6th year - client makes $40k
7th year - client makes $42.5k
8th year - client makes $45k  797.50
9th year - client makes $48k
10th year - client makes $50k (house valued at $895.5k now)

And this is just 10 years with the national average appreciation rate of 6 percent. 

SUMMARY
------------------------

Client invested $50k.  Lowest return client ever made on $$ was in first year (60%).  After just TEN years (not TWENTY), client has made $495,000 PLUS gets back the original $50,000 upon sale of the house PLUS, as long as they did not have an interest only mortgage, a lot of principal was paid down as well.

That, my friends, is the power of leveraging.  For fun, you could take it to 20 years.  Like I said, give me THREE percent a year in the RE market over 12 percent in the stock market.  I believe in what I do - but only for the right clients...young clients that have SOME money, understand the risk and are willing to learn, I will point them in this direction.

[/quote]

Mandate-

Your rosy scenario is lovely, but you forgot to include a few minor items like real estate taxes and repairs.

Also-just curious how that leverage works out if the home drops in value by 10% per year for the first 3-4 years?
[/quote]

Repairs are covered by home warranties, for the most part...$25k/month/house ($300/year/house).  Just to be on the safe side, though (so the warranty company doesn't try to back out) I get yearly A/C and roof inspections ($220/year/house).

Taxes are not an issue as they are part of the debt service that is more than covered by the rent checks.  As taxes (and insurance) go up, so do the rent payments (and yes, they will be going up for sometime around here---all real estate is local---because we had over 5000 condo conversions in the last 5 years -- no I am not in SE Florida). 

The area of the country I am in has NEVER experienced even one year of 10% loss in RE values.  The worst was a little over 5%.  The next year it recovered to positive 1% and then back on track again.  Those were the anomalies.

[quote=ManDate][quote=joedabrkr] [quote=ManDate]

[quote=aldo63]

Also I just did a hypo for a client who say Real estate in the only investment.

500 a month into ICA for 20 years =480k.

50k with no additions was about the same

50k adding 500 a month was about 900k.

and your saying dollar cost averaging does not work?[/quote]

Client invested $50k with no additions.  Comes to around $450k in ICA.

Instead of this, client takes same $50k and buys a $500,000 house.  RE market anually averages 6% (national historical compounded average). 

1st year - client makes $30k
2nd year - client makes $32k
3rd year - client makes $34k
4th year - client makes $36k
5th year - client makes $38k  (house valued at $670k now)
6th year - client makes $40k
7th year - client makes $42.5k
8th year - client makes $45k  797.50
9th year - client makes $48k
10th year - client makes $50k (house valued at $895.5k now)

And this is just 10 years with the national average appreciation rate of 6 percent. 

SUMMARY
------------------------

Client invested $50k.  Lowest return client ever made on $$ was in first year (60%).  After just TEN years (not TWENTY), client has made $495,000 PLUS gets back the original $50,000 upon sale of the house PLUS, as long as they did not have an interest only mortgage, a lot of principal was paid down as well.

That, my friends, is the power of leveraging.  For fun, you could take it to 20 years.  Like I said, give me THREE percent a year in the RE market over 12 percent in the stock market.  I believe in what I do - but only for the right clients...young clients that have SOME money, understand the risk and are willing to learn, I will point them in this direction.

[/quote]

Mandate-

Your rosy scenario is lovely, but you forgot to include a few minor items like real estate taxes and repairs.

Also-just curious how that leverage works out if the home drops in value by 10% per year for the first 3-4 years?
[/quote]

Repairs are covered by home warranties, for the most part...$25k/month/house ($300/year/house).  Just to be on the safe side, though (so the warranty company doesn't try to back out) I get yearly A/C and roof inspections ($220/year/house).

Taxes are not an issue as they are part of the debt service that is more than covered by the rent checks.  As taxes (and insurance) go up, so do the rent payments (and yes, they will be going up for sometime around here---all real estate is local---because we had over 5000 condo conversions in the last 5 years -- no I am not in SE Florida). 

The area of the country I am in has NEVER experienced even one year of 10% loss in RE values.  The worst was a little over 5%.  The next year it recovered to positive 1% and then back on track again.  Those were the anomalies.

[quote=aldo63]

500 a month into ICA for 20 years =480k.

50k with no additions was about the same

50k adding 500 a month was about 900k.

and your saying dollar cost averaging does not work?

[/quote]

I'm not sure I'm understanding your nums,

$120,000 invested over 20 years = $480,000 (BTW can we all agree to call them M's? K's are so "Metric System, scientist geek" M's are Roman!)

$50M invested for 20 years = $480M

$50M + "$120M over the 20 years" ($170M) = $900m (60M LESS than 100M invested for the 20 yrs.)

Doesn't sound like DCA did any big favors!

BUT I DIGEST:

The original posit to this thread (which I did not read in it's entirety, so this might have been raised before) pointed out the dirty little secret of that business (wirehose brokerage). That secret is that many don't retire rich from this bidness. Well, you might if you own the shop. Brokers stand around the coffee machine and brag to each other all day, "I just landed a $3MM account!" "Where'd he get the money?" "Sold his business." "Oh, lucky bastidge."

Second, I don't think that Warren Buffet would be the man he is without the stock market. Similarly, I've landed more than one IRA rollover in the million dollar range (granted, these people are savers and had been since they were young). Overall, the stock market has made more than it's fair share of multimillionaires (and ruint my than one of them too!)

Mr. A

My gosh, I am surprised that we have such stong opinions here...(dripping with sarcasm)

Real estate is definately not a "can't lose" proposition.  Not many things are.  But there is no denying the wealth building potential of real estate.

Someone on here predictably cited their American Funds mountain chart of ICA.  For the passive investor who doesn't want to think for themselves (I am being rather harsh I suppose) and would rather let a mutual fund company make all the decisions, then by all means, plug away your savings into the almighty ICA (or whatever fund), and cross your fingers and hope 30 years from now you can retire. 

Seriously, how many investors could even name the top ten holdings in ANY of the funds they hold???  They can't, that is the whole reason they own FUNDS in the first place.

We are a country of sheep, and mutual funds work well for sheep. 

I have never been a sheep, and that is what drew me to this career I suppose.  Regardless, I for one have decided, sink or swim, to be responsible for my own wealth, and not put it in the hands of anyone else as best I can.  Not to say I won't take advantage of IRA's and 401K matches when available, but I will not RELY on some mystical mutual fund company to carry me into retirement.

I will create my own wealth, and the area of investment that has the greatest ratio of REWARD to RISK in my opinion is real estate.

I like to think in simple terms, and I heard something simple the other day that really resonated with me.  Donald Trump and Robert Kiyosaki were on Larry King Live promoting their new book, and Larry King asked both of them which they thought was a better investment, real estate or the stock market?

Of course The Donald said real estate.  Predictable.  Robert Kiyosaki agreed, and made this simple statement.

Banks won't lend you money to buy mutual funds.  Why is that?

"Banks won't lend you money to buy mutual funds.  Why is that?"

Little thing called Reg T.

Yikes!

Mr. A

Definition of Reg T from Investopedia:

"The Federal Reserve Board regulation that governs customer cash accounts and the amount of credit that brokerage firms and dealers may extend to customers for the purchase of securities."

So you're saying you can walk in to your local bank, and they can/will give you up to 50% margin on your securities to buy more securities?  I don't think so.

No my friend, Reg T regulates brokerage firms and securities dealers, not banks.  Banks want no part of securities lending, except to take on AS COLLATERAL to shore up a deal to lend money for something other than securities, say real estate.

[quote=BankFC]

Definition of Reg T from Investopedia:

"The Federal Reserve Board regulation that governs customer cash accounts and the amount of credit that brokerage firms and dealers may extend to customers for the purchase of securities."

So you're saying you can walk in to your local bank, and they can/will give you up to 50% margin on your securities to buy more securities?  I don't think so.

No my friend, Reg T regulates brokerage firms and securities dealers, not banks.  Banks want no part of securities lending, except to take on AS COLLATERAL to shore up a deal to lend money for something other than securities, say real estate.

[/quote]

Nice rebuttal. (though I think Kiyosaki is a big time flake and Donald, while he has done very well, is not everything he proposes to be).

In regards to controlling your destiny.  I agree...another reason I like RE...no one is going to make shady decisions behind my back (in a corporate boardroom) to drive the value of my investment to zero.  Additionally, while I have taxes (capital gains & dividends?), they are paid by my renters.

As far as leaving this business?  Nah, too many sheep that need a shepherd.  The best of both worlds.

What does reg T regulate? Amount of cash/credit in the markets.

How does it do that? By regulating the rules of borrowing for market securities.

In order to do this, there are rules against using outside leverage to participate in the securities markets (you are not supposed to take money from a home equity loan for deposit into the stock market, you know that, right?). Otherwise there would be +50% leveraging in the market, and Reg T is written to keep this from happening.

It's not that the bank won't lend you money for mutual fund investing because they won't, but because they can't.

Where'd you get your series 7, JC Penny?

Mr. A

LOL.

So I correct your inaccuracy, and you resort to name calling.  Very Put Trader-ish.

[quote=BankFC]Definition of Reg T from Investopedia:

"The Federal Reserve Board regulation that governs customer cash accounts and the amount of credit that brokerage firms and dealers may extend to customers for the purchase of securities."

So you're saying you can walk in to your local bank, and they can/will give you up to 50% margin on your securities to buy more securities?  I don't think so.

No my friend, Reg T regulates brokerage firms and securities dealers, not banks.  Banks want no part of securities lending, except to take on AS COLLATERAL to shore up a deal to lend money for something other than securities, say real estate.[/quote]

For Banks, It's reg U and banks can and will loan 50% of the FMV of pledged equities/brokerage accounts.

[quote=ManDate][quote=BankFC]

In regards to controlling your destiny.  I agree...another reason I like RE...no one is going to make shady decisions behind my back (in a corporate boardroom) to drive the value of my investment to zero.  [/quote]

Ever heard of Eminent Domain? Ever heard of the Supreme Court decision in re it? The one where a local government can decide that they can invoke Eminent Domain if they can get a better tax use out of your property?

Not down to zero... Unless you just bought, or refinanced, and you have 10% into it and an ED offer at 75% of what you paid.

Mr. A

[quote=BankFC]

LOL.

So I correct your inaccuracy, and you resort to name calling.  Very Put Trader-ish.

[/quote]

You corrected my inaccuracy?

Sorry baby!  You don't know what you are talking about.

I corrected your correction and you resort to deflection of the issue. Very Bankfa-ish.

Mr. A

That very well might be correct.  I'll check with a couple lenders about the practical policies regarding how they treat Reg U.

Either way you slice it, Mr. A was Mr. Wrong. 

Ah you guys are all missing the boat.  The best investment and way more fun that managing real estate is this

http://www.barrett-jackson.com/auctionresults/common/cardeta il.asp?id=183447

or this

http://www.remarkablecars.com/ppads/showproduct.php/product/ 1429

[QUOTE]=Indyone

For Banks, It's reg U and banks can and will loan 50% of the FMV of pledged equities/brokerage accounts.

[/quote]

But you must attest that the proceeds of the loan will not be used to invest in securities of any type.

The point is, BankFC's sneer that the bank will not lend for mutual fund purchases is misguided (to be charitable).

Mr. A

Lol,

While it may not be illegal, why don't you just try to get a commercial lender to lend you $500,000 to put into a mutual fund???

Don't mind the laughs, and watch the door on the way out of the bank.

[quote=babbling looney]

Ah you guys are all missing the boat.  The best investment and way more fun that managing real estate is this

http://www.barrett-jackson.com/auctionresults/common/cardeta il.asp?id=183447

or this

http://www.remarkablecars.com/ppads/showproduct.php/product/ 1429

[/quote]

Now that's an investment I could get excited about.  I'd like to see a downturn in that market so those of us who don't have $2 million to spend on a car can buy a fun little toy like that.  Wait, do my kids really have to go to college?

[quote=BankFC]

Lol,

While it may not be illegal, why don't you just try to get a commercial lender to lend you $500,000 to put into a mutual fund???

Don't mind the laughs, and watch the door on the way out of the bank.

[/quote]

We must be talking past each other. I just said that banks may not lend you money for the expressed purpose of investing in securities.

They can lend money using securities as collateral.

The reason that they can not lend you money for investing in securities (and for right now I'm putting aside the prohibition against buying mutual funds on initial margin) is that, if they did, you could potentially have a securities position in which you had zero equity.

Historically, it was determined that one reason for the crash of 1929 was the excessive use of leverage wherein the average investor could buy with 10% down. The downside of this leverage being a snowballing of a moderate correction into a market crash.

The decision was made to raise the minimum margin requirement was to be 50%. In order to effectuate this reforem, it was necessary to separate the banks from the brokers, and give them separate regulations.

I'm saying this in hopes that you will be specific in your rebuttal. As opposed to your quippish responses thus far.

Mr. A

We must be talking past each other. I just said that banks may not lend you money for the expressed purpose of investing in securities.

They can lend money using securities as collateral.

I think you are talking past each other. Mr A is correct about lending money to buy securites or for market investments.

Also, as a former commercial lender I can tell you that I was highly unlikely to use securites as collateral for a loan, especially stocks and mutual funds.  Maybe US Treasuries or short term AAA Bonds at a low loan to value amount, but even then I would also require secondary collateral.

Thank you, BL.

Mr.A

[quote=mranonymous2u][quote=BankFC]

Lol,

While it may not be illegal, why don't you just try to get a commercial lender to lend you $500,000 to put into a mutual fund???

Don't mind the laughs, and watch the door on the way out of the bank.

[/quote]

We must be talking past each other. I just said that banks may not lend you money for the expressed purpose of investing in securities.

They can lend money using securities as collateral.

The reason that they can not lend you money for investing in securities (and for right now I'm putting aside the prohibition against buying mutual funds on initial margin) is that, if they did, you could potentially have a securities position in which you had zero equity.

Historically, it was determined that one reason for the crash of 1929 was the excessive use of leverage wherein the average investor could buy with 10% down. The downside of this leverage being a snowballing of a moderate correction into a market crash.

The decision was made to raise the minimum margin requirement was to be 50%. In order to effectuate this reforem, it was necessary to separate the banks from the brokers, and give them separate regulations.

I'm saying this in hopes that you will be specific in your rebuttal. As opposed to your quippish responses thus far.

Mr. A

Sharp enough to split a hair... Split a hare? EEEEEEEEEheeheeheeheeheeheehee!

I'll stipulate to your point (if that's the correct usage).

Either way, the fact remains that the bank doesn't not lend money to invest in the securities because they distain the quality of the markets as opposed to the quality of the Real Estate Market.

Right?

Mr. A

Hey, I’m gonna sell my trailer in Briny Breezes Florida. Talk about real estate that works.

[quote=BondGuy]Hey, I'm gonna sell my trailer in Briny Breezes Florida. Talk about real estate that works.[/quote]

Really? Where was it before the hurricane?

Mr. A

[quote=mranonymous2u]

Sharp enough to split a hair... Split a hare? EEEEEEEEEheeheeheeheeheeheehee!

I'll stipulate to your point (if that's the correct usage).

Either way, the fact remains that the bank doesn't not lend money to invest in the securities because they distain the quality of the markets as opposed to the quality of the Real Estate Market.

Right?

Mr. A

[/quote]

Banks don't lend to purchase speculative investments (period) unless there is adequate collateral or repayment from other sources and unless the loan to value ratio is low.  For instance when I was doing real estate type loans maximium lending rule of thumb is 80% ltv for residential, 45 to 50% ltv for commercial properties and less than 50% ltv if at all for unimproved property with no income history. Unimproved land with history of income and leases (grazing land or timber stands) was considered.  Lending on just the land, not the cattle or timber business, I mean.  That was a different proposition entirely.

The fear is that the loan might default and then you (the bank) will have the hassle and expense of foreclosure and putting the property back on the market at a possibly reduced market value or not being able to move the property in a timely manner.  There is nothing a bank hates more than OREO (other real estate owned).  At some point OREO has to be charged off as a loss or liquidated. If we have to go through this process, then the margin of ltv better be pretty good to make a profit. 

The main rationale for not using investments or securities as the primary collateral  is that the value can swing dramatically in the negative and throw the LTV out of wack.  Real estate has its ups and downs but not nearly as dramatic.  The issue with real estate is the liquidity of the repossessed collateral.  It really doesn't have to do so much with disdaining the market or not.

Instead of this, client takes same $50k and buys a $500,000 house.  RE market anually averages 6% (national historical compounded average). 

1st year - client makes $30k
2nd year - client makes $32k
3rd year - client makes $34k
4th year - client makes $36k
5th year - client makes $38k  (house valued at $670k now)
6th year - client makes $40k
7th year - client makes $42.5k
8th year - client makes $45k  797.50
9th year - client makes $48k
10th year - client makes $50k (house valued at $895.5k now)

And this is just 10 years with the national average appreciation rate of 6 percent. 

SUMMARY

reply

client year 1 pay 45k in interest payments @ 9% add taxes and insurance net  less than  about (-20k)

year 2 ect ect

[quote=mranonymous2u]

[quote=BondGuy]Hey, I'm gonna sell my trailer in Briny Breezes Florida. Talk about real estate that works.[/quote]

Really? Where was it before the hurricane?

Mr. A

[/quote]

Briny Breezes five hundred residents will vote next week to accept or reject a developer's $500,000,000 offer to buy their trailer park lock, stock and barrel. My guess is that for most of the residents, who will be getting in excess of a million dollars each for properties for which they paid no more than $150,000, that vote is going to be a resounding yes. Who hoo, I'm gonna get me house without wheels. That is, after I get back from Disney World!

Who said the Florida real estate market was dead? 

Isn't Capitalism great?

Wow!

Meanwhile, my parents are sitting in the condo they bought after Wilma ate their mobile home, (they bought and then sold another MH in the meantime, but that's another related story) watching the tube when who shows up but Marie!

Marie is a friend who still lived at the park and was leading a protest of gummers who had just been told "you have 60 days to vacate the premises and take that outhouse on wheels with you or I'm gonna charge you for getting rid of it!"

Apropos of not much.

Mr. A

Guys…just an update.  Finished the taxes for 2006 last night.   The massive tax deductions associated with the 3 rental properties gives us an $8500 tax refund for the year.

OUCH!!!  That's rough.

Any way you can adjust your W-4 this year to avoid this from happening again?

Sometimes I run into this same situation...no way to avoid it if you have alot of deductions.

scrim

i know…gotta fix that next year.

Real Estate is a “can’t lose” proposition if one is below age 30/35. The reality is if one has invested in real estate any time after 1992 the price has went up.



Many of my friends who are late 20 or early 30 somethings have this cant lose mentality. Its freaking crazy. With home/condo inventory at a record high and interest rates rising the only pressure in on prices to drop. One may say, "It’s long term."



That is good, I suppose, but don’t be foolish and think there is never bad times. Donald Trump damn near lost it all in the 90’s. I would also suspect that every local market has an akilies heal.



Now as property is appreciating everything is great. When the market turns things get nasty. Think about it. Tenent loses job and they are pissed off so they screw you over. At the same time you have to pay taxes and mortgage. Home is losing value. It can get nasty and I suspect it will.



Beyond the obvious that rates are rising and home inventory the economy is cyclical. Typically real estate is 7, but today we are going into 9. This means that it is probable that real estate will turn. On top of this the economy has been a bull for a long time. I don’t want to be a bear, but maybe I am.



Are forclosures counted within the number of unsold homes?

[quote=AirForce]Real Estate is a “can’t lose” proposition if one is below age 30/35. The reality is if one has invested in real estate any time after 1992 the price has went up.



Many of my friends who are late 20 or early 30 somethings have this cant lose mentality. Its freaking crazy. With home/condo inventory at a record high and interest rates rising the only pressure in on prices to drop. One may say, “It’s long term.”



[/quote]

“Can’t lose” is probably a safe assertion to make if:

1.) You have a high quality property.
2.) Your time frame is sufficiently long.
3.) You are not overleveraged, such that you can safely afford to cover the carrying costs even through the worst of times.

You just have to be willing to ride out the dips and hang on for the better days…hence numbers 2 and 3.

Interesting thing is…you could make the above statement about a basket of 10 randomly selected quality growth stocks in 1999(near the market peak) as credibly as you could about a piece of real estate.

Food for thought.

Except that you couldn’t have put 10,000 down for a $200,000 basket of stocks.

And you wouldn’t have received fantastic tax deductions for owning those stocks.

[quote=ManDate]And you wouldn’t have received fantastic tax deductions for owning those stocks.[/quote]

Depends upon whether or not you took tax losses!

Seriously, though, you also couldn’t sell “part” of that house if you needed a new car, pay an unexpected bill, and so forth.

You also can’t get an accurate valuation on your real estate investment by picking up the morning paper(i.e. stock quotes) or logging onto the internet.

Your stocks won’t drop in value or become impossible to sell because the neighborhood changes around you.

I’m just saying that RE isn’t a bad investment, it just isn’t “all that and more”…but hey you keep thinking that if you want to.

[quote=joedabrkr] [quote=ManDate]And you wouldn't have received fantastic tax deductions for owning those stocks.[/quote]

Depends upon whether or not you took tax losses!

Seriously, though, you also couldn't sell "part" of that house if you needed a new car, pay an unexpected bill, and so forth.

You also can't get an accurate valuation on your real estate investment by picking up the morning paper(i.e. stock quotes) or logging onto the internet.

Your stocks won't drop in value or become impossible to sell because the neighborhood changes around you.

I'm just saying that RE isn't a bad investment, it just isn't "all that and more"....but hey you keep thinking that if you want to.
[/quote]

I'm selling a house in SW FL. We're interviewing realtors now. The market in SW Fl has totally collapsed. This isn't a problem for us, as even the stressed market pricing will give us a tax problem to deal with later. The market condition will extend the time it takes to find a buyer. We didn't buy the place as an investment and it hasn't worked out the way we had envisioned as far as a winter home goes. Since I'm not looking to become a landlord, off it goes.

Two ways of looking at this:

One: RE is great because we are going to make a nice profit.

Two: We got lucky buying property just ahead of a wave. Those who are not so lucky are in some serious hurt if they need to sell right now. No telling how long a recovery will take and it will likely get worse before it gets better.

Security holdings for investors is just another arena in which to invest. The clients we're talking to should have holdings in each. And, as always, nothing beats a foundation of good old tax free bonds. Thought I'd get that in there since we're talking real estate terms.

[quote=BankFC]Except that you couldn’t have put 10,000 down for a $200,000 basket of stocks.[/quote]



Stock Index futures? Options on stock index futures?

If you think you cannot lose money in real estate, consider reading a
history of the savings and loan debacle of the late 80’s.  A big
chunk of the $100 billion taxpayer bailout was “cannot lose real estate
deals” that did not work out.

There are wealthy brokers. I have been around a while over 20 years and I am close to 8 figures, almost there. But in my same branch there are two more heavy hitters that are 5 and 8 years younger than me that clear close to one million bucks a year and are ahead of me in production and AUM… so I am sure they will pass me pretty soon unless they are spending an irrational amount.

Oh and about real estate. Go buy an international real estate fund, you will get 13-15 percent annualized for the next 30 years.

[quote=worth6788]Oh and about real estate. Go buy an international real estate fund, you will get 13-15 percent annualized for the next 30 years.
[/quote]

Why do you say that?