Anyone feel like they missed out by not buying real estate?

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alex123711
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Anyone feel like they missed out by not buying real estate?

Post by alex123711 »

As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
Normchad
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Re: Anyone feel like they missed out by not buying real estate?

Post by Normchad »

alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
Nope. I don’t feel bad about it. I don’t want that kind of headache in my life…..
smooth_rough
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Re: Anyone feel like they missed out by not buying real estate?

Post by smooth_rough »

OP question is too general. Any property is good investment if its priced correctly. The converse is also true.
IowaFarmWife
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Re: Anyone feel like they missed out by not buying real estate?

Post by IowaFarmWife »

Normchad wrote: Mon Jan 02, 2023 8:17 pm
alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
Nope. I don’t feel bad about it. I don’t want that kind of headache in my life…..
Ditto.
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runner3081
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Re: Anyone feel like they missed out by not buying real estate?

Post by runner3081 »

Not passive enough for me.
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windaar
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Re: Anyone feel like they missed out by not buying real estate?

Post by windaar »

alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
I guess that's like missing out on not buying APPL in 1980.
Nobody knows nothing.
02nz
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Re: Anyone feel like they missed out by not buying real estate?

Post by 02nz »

alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
Real estate should be viewed as a consumption good. As an investment, it's not great - a single property (or even a collection of properties) is far riskier in some ways than the stock market (e.g., neighborhood goes bad, sinkhole develops in your yard ...). It's not very liquid and transaction costs are high. And overall it really only keeps up with inflation, even though individual locales can experience much higher growth. However, the reality is that many Americans can't / don't save except for the equity they build up over time in their homes, and so we've convinced ourselves that our homes are an "investment," which often leads to consuming too much housing ("We have a 6-bedroom McMansion for a family of 4, because it's a good investment!").
Last edited by 02nz on Mon Jan 02, 2023 8:33 pm, edited 1 time in total.
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Re: Anyone feel like they missed out by not buying real estate?

Post by ScubaHogg »

I bought a house in 2006 that I ended up selling at a 20% loss. So that was fun

It cuts both ways
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smooth_rough
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Re: Anyone feel like they missed out by not buying real estate?

Post by smooth_rough »

windaar wrote: Mon Jan 02, 2023 8:26 pm
alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
I guess that's like missing out on not buying APPL in 1980.
Not possible to generalize that way about real estate.

If you bought condo in SF before pandemic for $1.5M, now it would sell for $1M. You would have lost $500K in 3 years.
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Re: Anyone feel like they missed out by not buying real estate?

Post by Apathizer »

As a homeowner for about 6 years who's in the process of selling, no. While it's actually worked out for me, I don't like being a homeowner, and am looking forward to investing the proceeds of selling into stocks and bonds. As others have said, real estate is undiversified, so much riskier than total market stocks and bonds.

If someone genuinely wants to be a homeowner because they value it intrinsically that's fine, but expecting to be a good investment is risky. That's not to say it can't be, but it's a major risk.
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Re: Anyone feel like they missed out by not buying real estate?

Post by exodusNH »

ScubaHogg wrote: Mon Jan 02, 2023 8:29 pm I bought a house in 2006 that I ended up selling at a 20% loss. So that was fun

It cuts both ways
+1. Inflation-adjusted, I still need another 20% to break even from a 2005 purchase.
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ClevrChico
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Re: Anyone feel like they missed out by not buying real estate?

Post by ClevrChico »

I'm not sure commercial real estate is doing well, especially offices. Residential has been doing very well here recently, but it's also very cyclical.

One house is enough for me.
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Re: Anyone feel like they missed out by not buying real estate?

Post by finite_difference »

A lot of places have not gone up 50%, never mind 100%!
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Re: Anyone feel like they missed out by not buying real estate?

Post by Kookaburra »

The book isn’t complete yet on that 50-100% run-up. Debt isn’t so cheap anymore and it could take awhile to see the effect of higher rates (and forthcoming unemployment) on home values.
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Re: Anyone feel like they missed out by not buying real estate?

Post by AnnetteLouisan »

I regret having bought. Big hassle and a loss of flexibility. Plus mine hasn’t increased in value at all.
Last edited by AnnetteLouisan on Tue Jan 03, 2023 4:28 am, edited 3 times in total.
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Re: Anyone feel like they missed out by not buying real estate?

Post by nisiprius »

There is always some investment that has done better than yours.

If you translate that objective fact into an unhappy emotion, "I missed out," then you are going to feel continually unhappy.

When we are in the process of making a decision, we usually go through a period of ambivalence. We feel both "I should" and "I shouldn't," practically at the same time. If we decide not to and we don't like the outcome, it is easy to selectively remember thinking "I should," and saying after the fact "I knew I should have."

But you didn't know.
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Re: Anyone feel like they missed out by not buying real estate?

Post by Jack FFR1846 »

We bought out house in 1985 for $125k. In 1988, my company sent me away to get my graduate degree and I first got real estate agent estimates on what I could sell the house for, then what it would rent for. The average selling price would be $150k. I stupidly rented it out. We came back in 1990 and put the house up for sale in 1991. It sold for $125k. So while I did buy real estate, I certainly missed out on any gains.
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alex123711
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Re: Anyone feel like they missed out by not buying real estate?

Post by alex123711 »

windaar wrote: Mon Jan 02, 2023 8:26 pm
alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
I guess that's like missing out on not buying APPL in 1980.
Not really, apple is a single stock, real estate is an asset class
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Re: Anyone feel like they missed out by not buying real estate?

Post by Gardener »

nisiprius wrote: Mon Jan 02, 2023 9:08 pm There is always some investment that has done better than yours.

If you translate that objective fact into an unhappy emotion, "I missed out," then you are going to feel continually unhappy.

When we are in the process of making a decision, we usually go through a period of ambivalence. We feel both "I should" and "I shouldn't," practically at the same time. If we decide not to and we don't like the outcome, it is easy to selectively remember thinking "I should," and saying after the fact "I knew I should have."

But you didn't know.
Wise post.

And of course it applies to more areas in life than just money.
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Re: Anyone feel like they missed out by not buying real estate?

Post by lakpr »

IowaFarmWife wrote: Mon Jan 02, 2023 8:20 pm
Normchad wrote: Mon Jan 02, 2023 8:17 pm
alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
Nope. I don’t feel bad about it. I don’t want that kind of headache in my life…..
Ditto.
+2!! I am older than 50, and I really do not want a second job.
Makaveli
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Re: Anyone feel like they missed out by not buying real estate?

Post by Makaveli »

consider how many homes in the Midwest flooded in the past few weeks from pipes freezing/bursting. I witnessed one. I’m not “missing” anything.
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Re: Anyone feel like they missed out by not buying real estate?

Post by Booper »

smooth_rough wrote: Mon Jan 02, 2023 8:30 pm
windaar wrote: Mon Jan 02, 2023 8:26 pm
alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
I guess that's like missing out on not buying APPL in 1980.
Not possible to generalize that way about real estate.

If you bought condo in SF before pandemic for $1.5M, now it would sell for $1M. You would have lost $500K in 3 years.
Do you have any references to back this up? I believe you, but I thought SF real estate always went up, so I'm curious to see any hard data on this.
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Re: Anyone feel like they missed out by not buying real estate?

Post by Sandtrap »

alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually.
1
Is there a case for real estate as an investment?
1
Of course there is. . . in general. . with lots of specifics and caveats. . and exceptions. . and personal success or fail stories. . .

2
Between the absolute bottom of the R/E industry after 2008 then up to 2011, properties were rock bottom. Some on the market and unsold and vacant for years and years. Million dollar properties up for sale for 300k. Bank auctions, etc.
Many are now 3x the price and 3x the rent if a rental building.

3
Examples:
The Tempe, Scottsdale corridor was rezoned, then slowly "gentrified" (i think this is a new term). 12 and 20 unit apartment buildings were going for a song. Now, since 2010, 13 years later, they have tripled in value and nearly double to tripled in market rents.
Examples:
Townhouses in a nice area were going for 80-90k around 2010. Now, selling for 3x the price and over double the rent.
Example:
In 2010, A 31 unit apartment complex was selling for only 1.5 million. It has now more than tripled in value and double to triple market rents. (shucks. . missed that one. . . )

4
But, there are losing stories as well.

**But, exceptions do not make for the greater bell curve. Exceptions are like personal perspectives so. . it depends.

5
R/E is a business. It is not passive investing like an employee's 401k or retirement investing portfolio.

Some people think of "Real Estate" as a physically owned property.
Others think of "Real Estate" as REITS or various sector funds, etc.
And so forth.

to op:
What do you mean by "Real Estate" in this generalized question you pose?

j :D
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srt7
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Re: Anyone feel like they missed out by not buying real estate?

Post by srt7 »

alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
I suppose we could also say the same about used cars :D Who could've predicted that a (non-vintage) automobile would appreciate!!

Also, while physical RE would provide relatively higher control (i.e. one could spruce it up for a higher rent but can't account for a sinkhole or the infamous example of getting a tenant call for a broken toilet at 2AM LOL!!) than index funds it is by no means a passive investment (which is what this site is all about so ...)

Anyway, let's wait another year to conclude if one missed out as like someone said the book is still being written.
Taking care of tomorrow while enjoying today.
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Re: Anyone feel like they missed out by not buying real estate?

Post by placeholder »

alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
I don't live in an area where that has happened.
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Re: Anyone feel like they missed out by not buying real estate?

Post by KlangFool »

alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
No. I would be helping my daughter to pick up housing bargain in the coming real estate crash.

Anyone that has been around since 2004/2005 would understand that there is a real estate cycle.

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smooth_rough
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Re: Anyone feel like they missed out by not buying real estate?

Post by smooth_rough »

Booper wrote: Mon Jan 02, 2023 9:30 pm
smooth_rough wrote: Mon Jan 02, 2023 8:30 pm
windaar wrote: Mon Jan 02, 2023 8:26 pm
alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
I guess that's like missing out on not buying APPL in 1980.
Not possible to generalize that way about real estate.

If you bought condo in SF before pandemic for $1.5M, now it would sell for $1M. You would have lost $500K in 3 years.
Do you have any references to back this up? I believe you, but I thought SF real estate always went up, so I'm curious to see any hard data on this.
SF condo market is in free fall. SF office vacancy rate 27%. This is not good site to discuss real estate investing.
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Re: Anyone feel like they missed out by not buying real estate?

Post by scotthew »

If you can access it, here’s a topical recent article

https://www.theatlantic.com/newsletters ... ng/672511/
RedDog
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Re: Anyone feel like they missed out by not buying real estate?

Post by RedDog »

I feel very good about owning a SFH portfolio.

BTW…the concerns expressed by real estate investing naysayers is real but exaggerated.
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Re: Anyone feel like they missed out by not buying real estate?

Post by crossbow »

Anyone else feel like they dodged a bullet by not holding crypto? Anyone else feel like they missed out by not buying the winning lottery ticket?

Point is - nobody has a crystal ball, so don't beat yourself up for something you couldn't have possibly known.
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Re: Anyone feel like they missed out by not buying real estate?

Post by toomanysidehustles »

RedDog wrote: Mon Jan 02, 2023 11:07 pm I feel very good about owning a SFH portfolio.

BTW…the concerns expressed by real estate investing naysayers is real but exaggerated.
Agree, I've voiced my opinion before. I bought two SFH's $630K each during the pandemic when the market was at it's peak w/ 20% down, 3% 30 year fixed and turned them into AirBnb's. They generate $70-$100K each in rents/year currently and are close to 1M each on zillow right now. I'm not selling any time soon, but I am buying FXAIX with the money I am making on airBnB rents. My 18 year old son is also learning property mgm't.

Lots of ways to skin a cat as they say. Rental properties are a lot of work but I like to be diversified. There are MANY tax benefits as well.
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Re: Anyone feel like they missed out by not buying real estate?

Post by quantAndHold »

Booper wrote: Mon Jan 02, 2023 9:30 pm
smooth_rough wrote: Mon Jan 02, 2023 8:30 pm
windaar wrote: Mon Jan 02, 2023 8:26 pm
alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
I guess that's like missing out on not buying APPL in 1980.
Not possible to generalize that way about real estate.

If you bought condo in SF before pandemic for $1.5M, now it would sell for $1M. You would have lost $500K in 3 years.
Do you have any references to back this up? I believe you, but I thought SF real estate always went up, so I'm curious to see any hard data on this.
Median condo prices in San Francisco are down 4.3% since January of 2020. From $1.2M to $1.15M. Not exactly $500k. And not freefall.

Of course, if you had bought that condo in 2013 and held until now, it would be up 100%.
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Re: Anyone feel like they missed out by not buying real estate?

Post by ScubaHogg »

alex123711 wrote: Mon Jan 02, 2023 9:15 pm
windaar wrote: Mon Jan 02, 2023 8:26 pm
alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
I guess that's like missing out on not buying APPL in 1980.
Not really, apple is a single stock, real estate is an asset class
Was the original post about missing out on REITs or missing out on not having bought a single unit/house/condo?
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Re: Anyone feel like they missed out by not buying real estate?

Post by retireIn2020 »

I bought some rental properties back in the late 1980's very motivated and in my 20's. I made some money, but I did work for that money while raising kids and working full time at MEGA corp.

All I remember is that how relieved I was after selling them in the early 2000's and never having to deal with them again. Now being retired I couldn't imagine going through that!
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Re: Anyone feel like they missed out by not buying real estate?

Post by cbox »

Hell no. I hate real estate.

You don't just "buy" real estate and watch it go up. You go into debt (or blow a big hole in your savings). You pay a mortgage. You pay for repairs or potentially deal with horror stories from renting. You watch the housing market. On and on and on.

I HATE REAL ESTATE.

I need a place to live--a small place to live! Other than that, real estate can go take a hike.

Also, note, the worst time to buy a property is when the market has gotten so ridiculous that bidding wars are commonplace. That this is the worst time will be evident in hindsight.

Did no one learn anything from 2008? Seems like it used to take at least a generation for a new crop of suckers to come along and fall for the same thing that their grandfathers did. But now it seems like the timeframe has been compressed. Dot-com nonsense to housing bubble: 8 years. Housing bubble to crypto scam and new housing bubble: ~10 years.

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Re: Anyone feel like they missed out by not buying real estate?

Post by ClassII »

Everyone is dealing in absolutes. RE isn't the ultimate investment and shouldn't be expected to exceed equities. Diversification is nice however so RE in general is a nice compliment to equities.

Plus, you gotta live somewhere! I'm quite thankful that my mortgage payment hasn't entirely been flushed down the toilet to the landlord like when I used to rent. Plus the house has done well with equity over the years. I'm sure if I put that all into VTSAX I'd have away more money but again, I have to pay for housing one way or another. This way at least some of it stays with me.

Being a landlord, however is more complicated. I can't argue with the results of friends of mine with several properties but then they're leveraged to the rafters. Perhaps the real way to compare is not VTSAX/RE but UPRO/RE as they have roughly the same leverage. Don't forget to account for management fees or, at minimum, whatever you think your time is worth into the cost calculation.
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alex123711
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Re: Anyone feel like they missed out by not buying real estate?

Post by alex123711 »

ScubaHogg wrote: Mon Jan 02, 2023 11:59 pm
alex123711 wrote: Mon Jan 02, 2023 9:15 pm
windaar wrote: Mon Jan 02, 2023 8:26 pm
alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
I guess that's like missing out on not buying APPL in 1980.
Not really, apple is a single stock, real estate is an asset class
Was the original post about missing out on REITs or missing out on not having bought a single unit/house/condo?
Not about REITS, physical real estate
Last edited by alex123711 on Tue Jan 03, 2023 2:18 am, edited 1 time in total.
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Re: Anyone feel like they missed out by not buying real estate?

Post by Maverick3320 »

alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
by arbitrarily picking both the start point and end point you can make the case for investing in almost anything.
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Re: Anyone feel like they missed out by not buying real estate?

Post by Mustang8307 »

I’m 39 and just bought a condo in July. I’m glad my kids have a bigger space, but it is stunning how much it costs to fix up/ maintain a place. Our net worth has declined significantly over the past year.
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Re: Anyone feel like they missed out by not buying real estate?

Post by invest4 »

alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
Maybe...however:

* What goes up can also come down...dramatically in some cases. People also thought real-estate could only go up...right before the Great Financial Crisis (GFC). Personally, I would not be thinking now was a good entry point to get started Of course, I could be completely wrong.

* My strong perception is real-estate is a part-time job. No thanks for me.
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Re: Anyone feel like they missed out by not buying real estate?

Post by VaR »

My experience in real estate:
1. 20% appreciation on my first house over 16 years - 1.1% annualized
2. 300% appreciation on my second house over 27 years - 5.3% annualized
3. 30% appreciation on my third house over 15 years - 1.8% annualized

These were in major metropolitan areas in three different states. With each of them, I experienced a period of buyer's remorse due to either problems with the house or going way underwater in my mortgage.

No one should feel that they've missed out - especially if you're looking at special situations over cherry-picked time periods.

The other thing to remember is that it's generally true that as investment property goes, you'll probably have big negative carry in areas that are known for higher appreciation. In contrast, you'll see lower appreciation in areas with neutral carry and almost no appreciation in areas with positive carry.

Even with the second house that I did well on, most of the appreciation was in the first 10-12 years. The second 15 years has been basically flat - maybe 2% appreciation every year.

I'm probably happiest with the third house because it went down by 50% in the first few years before recovering slowly in the next decade to nearly what I bought it for and then shooting up by more than 50% over the past few years.
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Re: Anyone feel like they missed out by not buying real estate?

Post by dcabler »

Nope - I don't want any more of my wealth tied up in real estate beyond my own house.

Cheers
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Re: Anyone feel like they missed out by not buying real estate?

Post by fabis »

...Government already showed you what they can do to rent payments in 20-21...
smooth_rough
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Re: Anyone feel like they missed out by not buying real estate?

Post by smooth_rough »

quantAndHold wrote: Mon Jan 02, 2023 11:55 pm
Booper wrote: Mon Jan 02, 2023 9:30 pm
smooth_rough wrote: Mon Jan 02, 2023 8:30 pm
windaar wrote: Mon Jan 02, 2023 8:26 pm
alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
I guess that's like missing out on not buying APPL in 1980.
Not possible to generalize that way about real estate.

If you bought condo in SF before pandemic for $1.5M, now it would sell for $1M. You would have lost $500K in 3 years.
Do you have any references to back this up? I believe you, but I thought SF real estate always went up, so I'm curious to see any hard data on this.
Median condo prices in San Francisco are down 4.3% since January of 2020. From $1.2M to $1.15M. Not exactly $500k. And not freefall.

Of course, if you had bought that condo in 2013 and held until now, it would be up 100%.
You sound confused.

Downtown S.F.’s condo market is cratering, with units selling at reduced prices

https://www.sfchronicle.com/sf/article/ ... 627978.php
NiceUnparticularMan
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Re: Anyone feel like they missed out by not buying real estate?

Post by NiceUnparticularMan »

This sentiment also brought to you by The Ghost of Bubbles Past:

Image

There seems to be something about real estate in particular that really attracts a FOMO sentiment that tends to help feed speculative boom and bust cycles. Of course inexpensive mortgages may contribute as well.

Anyway, it may have looked like the people who bought during the last few years of the late-80s and mid-00s bubbles had done great, particularly if they used leverage, but the upcoming trough was about to slam even them really hard, not just the people who bought at the peak. And then the recovery took a long time, and even the long-term real returns have been meh--certainly not as good as, say, stocks.

Of course if you bought in 2020 and recently sold, you did well. Same with if you bought in 2004 and sold in 2006, bought in 1987 and sold in 1989, and so on.

But if you bought in 2020 and don't sell? Lots of "interesting" things could happen from here.
exodusNH
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Re: Anyone feel like they missed out by not buying real estate?

Post by exodusNH »

ClassII wrote: Tue Jan 03, 2023 1:12 am Everyone is dealing in absolutes. RE isn't the ultimate investment and shouldn't be expected to exceed equities. Diversification is nice however so RE in general is a nice compliment to equities.

Plus, you gotta live somewhere! I'm quite thankful that my mortgage payment hasn't entirely been flushed down the toilet to the landlord like when I used to rent. Plus the house has done well with equity over the years. I'm sure if I put that all into VTSAX I'd have away more money but again, I have to pay for housing one way or another. This way at least some of it stays with me.

Being a landlord, however is more complicated. I can't argue with the results of friends of mine with several properties but then they're leveraged to the rafters. Perhaps the real way to compare is not VTSAX/RE but UPRO/RE as they have roughly the same leverage. Don't forget to account for management fees or, at minimum, whatever you think your time is worth into the cost calculation.
Keep in mind that you also buried your down payment and monthly principal payments into the property. There's an opportunity cost there vs investing it.

I've run the numbers for myself several times. Had I been renting, my net worth would have been roughly the same vs owning, assuming I invested the down payment and the continuing principal amounts. A big benefit of owning is the forced savings component, as the typical person is bad at saving.

Owning is not categorically better than renting. Long term, real estate, in general, only beats inflation by about 1%. (There are obviously a lot of examples that are counter to that.)

Having bought at a local peak in 2005, I will be fortunate to net 0% real when I eventually sell, especially considering that I have put a new roof and HVAC in. And I will likely have the privilege of paying capital gains over the exclusion amount even though my real return was $0.
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Watty
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Re: Anyone feel like they missed out by not buying real estate?

Post by Watty »

alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
I already probably have too much in real estate and I do not own any investment property.

I have a paid off house in a medium cost of living area that is more than a third of my net worth.

Even if you have a mortgage for 80% of the homes value your exposure is still the market value of the house. Someone that is just starting out can easily have more than 100% of their net worth in their house.

Many of the companies that I own in my index funds also have a lot of exposure to real estate. For example McDonalds is basically a big real estate company and not a restaurant chain when you look at details of their business. Google that if you don't believe it. That is an extreme case but many companies in the index funds own significant real estate often using debt to leverage their real estate investments.
Last edited by Watty on Tue Jan 03, 2023 8:35 am, edited 1 time in total.
Jags4186
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Re: Anyone feel like they missed out by not buying real estate?

Post by Jags4186 »

alex123711 wrote: Tue Jan 03, 2023 1:49 am
ScubaHogg wrote: Mon Jan 02, 2023 11:59 pm
alex123711 wrote: Mon Jan 02, 2023 9:15 pm
windaar wrote: Mon Jan 02, 2023 8:26 pm
alex123711 wrote: Mon Jan 02, 2023 8:16 pm As it has gone up so much, a lot of areas are up well over 50%, some over 100% in the last 2-3 years, and due to leverage those cash on cash returns are even higher, much higher actually. Is there a case for real estate as an investment?
I guess that's like missing out on not buying APPL in 1980.
Not really, apple is a single stock, real estate is an asset class
Was the original post about missing out on REITs or missing out on not having bought a single unit/house/condo?
Not about REITS, physical real estate
If you’re talking about physical real estate it is perfectly comparable to a single stock. A unique property in an unique location.

Not sure how you call real estate an asset class without being able to buy a representative sample of the asset class — I.e. a REIT. FYI since 2020 Vangurd’s REIT Index fund is down 2% while the SP500 is up 24%
NiceUnparticularMan
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Re: Anyone feel like they missed out by not buying real estate?

Post by NiceUnparticularMan »

Some listed companies own real estate, some a lot, but there is an argument to the effect that commercial real estate is "underweight" in the assets of listed companies, basically because a lot of other people and entities own real estate they lease to listed companies.

That then is an argument for a modest allocation of equity to REITs, to sort of more closely mirror the actual market allocation of capital when you look beyond just listed companies. But then REITs are included in some stock indices (but not others). Still, net of that you might still think something like 5-10% of equity in REITs made sense.

And that is what I have done, in fact.
aristotelian
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Re: Anyone feel like they missed out by not buying real estate?

Post by aristotelian »

Nope, as a homeowner I can vouch that you are not missing out on anything. Our house has been nothing but headaches. New roof, two water heaters, constant sewer issues, due for new HVAC. We probably have come out ahead vs renting but not by much and not worth the stress and responsibility.
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