Mutual fund or real estate investment

[SurferTiki]

Originally Posted by Johansen8

For the long term, NOTHING beats stocks. Historically real estate barely covers inflation over the long term. There have been short periods over the past 30 years or so of unusually high real estate price inflation but over the long haul real estate generally isn't a great investment UNLESS you are heavily leveraging your investment with credit. That's risky because if the market tanks, you're on the hook for the balance of the loans.

"Historically real estate barely covers inflation over the long term."

This is not true. You are not including the monthly cash flow provided by the renters, especially in coastal markets. Avg cap rate at 5 to 6% plus inflation is 7 to 9% return on investment. That is assuming you live in a stagnate area. Also your risk is much lower over the long term.

[Vytautas]

One consideration when investing in real estate is to make it viable for personal use. A friend of mine owns multiple homes. One is his families permanent residence, another is a vacation home on the coat and the third is a home near the hospital he works at. All are used regularly and the value appreciates on them. He has recently started renting out the vacation. This would clearly be a long term investment but you can also make personal use out of the properties while they appreciate.

[Rpainter]

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Ryan.Painter@econohomes.com

[kenyantykoon]

i prefer real estate hands down because i find it more fun and kind of easier to manage. but i also have a small part of my portfolio invested in some mutual funds

[trustno1]

Well, as my dad used to tell me...(he was a developer, home builder and had tons of rental property) You can still make money in the real estate "investment" market. You just add one more rule to the purchasing end...make sure every property you buy is one that you would not mind living in yourself, because you just might have to , some day...hehehe.

Although I am extremely organized by nature, I am also an "adventurer" when it comes to business. I never was one to listen to my parents advice, or frankly, any other authority figure. I have a solid background in the mechanics of financial models, and certainly agree that comparing investment vehicles is a prudent approach to selecting the "best" strategy...but I just look at the big picture from a different angle.

I have never given "market conditions" much concern. I believe there are always opportunities to make money in any economic condition and any market. You just have to uncover the areas where the opportunities have shifted, as the economic conditions push them around. I have been involved in everthing from IRL racing to corporate turnaround consulting, to art investing, to setting up asset management resale networks for lease-end equipment returns. If the opportunity presents itself, I am in for the adventure.

Kind of a scary business philosophy, eh? Hey, it works for me.

The current economic condition translates to a picture of the "Wild West" days in my world. Everything is upside down and many are facing instability and uncertain futures for the first time. For me, it is like the world became one big "flea market", and your wits are your only tool. Scary for most, a big candy store for me...can not wait to see what I am going to be into next. Maybe a house "gutting" service cleaning out the furniture left behind by the victims of those foreclosed homes banks are "collecting". lol

[mtsen]

mutual fund is relatively straight forward, you apply dollar cost averaging and you forget about it.

property investment has a much wider range for creativity, which also imply higher risk when you do not have the right knowledge.

One would usually keep some money in mutual fund first and then slowly pick up other investment methods

here is a link to some foundation concept in property investment

http://malaysiapersonalfinance.blogs...nt-method.html

[Socal104]

If you are buying real estate, the key is that you need to be renting it out. Playing the price appreciation game is not going to work out for many years and was an aberration earlier this decade. The plus about rental units is that you can expense both depreciation and related expenses so that you can shelter your rental income from taxes. If you make under $100,000 AGI, you can also take some losses. So when you sell the property after many years you will get a capital gain typically at lower rates. The trick of course is to find a property where you can cash flow positive from day one with a reasonable down payment. The nice thing about the real estate slump is that you can do this again in many more places. The negatives to real estate are pretty clear today, price declines, maintenance, and dealing with tenants. I had a property a couple years ago that was making bank and then boom you have lower rental income plus a bunch of repairs that cut your income by 30%. But if you are holding the property for a long time, the key is really the rental income and once you clear the mortgage, you are pulling in a lot of cash. If you have 3 or 4 of these, you have your retirement in hand.

A mutual fund is totally different. The first rule of mutual funds is get the lowest cost fund you can. Check out How to Buy the Market Cheaply to get an idea of what good mutual funds will cost you. With a mutual fund, especially an index fund, you sit back and just watch it over time. The market goes up and it goes down, but over time it will give you a very nice 9-11% return depending on the period. If you put in money in March you would be up 50% for this year. Of course you would have taken some serious hits if you invested two years ago.

Ideally you have both. You should be entering in with mutual funds since you can start with a few grand, but when you have enough money, and you can identify a good property that has positive cashflow with a 20% downpayment, you should invest in that too. This will help you diversify.

SoCal

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Living the Good Life Cheaply

[trustno1]

I just buy artwork now...

[kenyantykoon]

i have never liked derivatives and they have caused the implosion of this economy in a very large scale. another reason why i am opposed to mutual funds. here is yet another http://kenyantykoon.wordpress.com/20...-mutual-funds/