Local Real Estate Comments and Ramblings

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$20,000 to invest - Stocks? Real Estate? Keep the cash?

Sometimes the best blog answers make the best posts.  The question was posted over on the Zillow boards about where an individual should invest $20,000 if they have it to invest.

Here is my answer ...

 

Carlton,

Any investment should be looked at as a long term investment.  That goes for real estate, stocks, or anything else.  If you don't have the stomach for the current roller coaster then stay in cash. 

Don't invest in anything you don't understand.  Some people understand the stock market and I think most people have a decent understanding of residential real estate.

Owning Real estate as an investment is very hands on.  There are tenants and maintenance issues to deal with. But you should get a higher return on real estate.

Why?

Real estate is I.D.E.A.L

I-  It provides INCOME from the rental.  That income can cover all or most of the ongoing monthly cost of ownership.  The tenants end up paying for your home

D- DEPRECIATION - In todays market some of the depreciation is real.  But really this refers to the many tax advantages of owning rental property

E- EQUITY is built up over time as you make payments.

A- APPRECIATION Over the long term real estate DOES go up in value. Remember that you need to be in any investment for the long term.

L- LEVERAGE -  Your $20,000 can buy you $20,000 worth of stock or make a 20% down payment on a $100,000 home.  5 years from now if both have gone up by 10% then you made $2000 on the stock or $10,000 on the $100,000 dollar house.

So for stock to do what a real estate investment does for you
1.You would buy the stock on a 20% margin and finance the rest
2.The stock would pay dividends high enough to cover all or most of the financed payment
3.Your balance would go down each month on the financed amount
4.Uncle Sam would let you write off the interest and other expenses
5.The stock would go up in value over time.  Of the five this is the only one that is realistic.


So invest $20,000 in a $100,000 home and deal with tenants, vacancy, and management.  If it goes up by 10% in the next 5 years you make $10,000 plus any equity build plus any tax advantages minus any management or vacancy costs.

Invest $20,000 in the stock market and it goes up 10% in the next 5 years and you make 2,000 with no real headaches.

Ultimately that is a personal decision that you need to make yourself.  I know which way I would lean!

Call if I can help.

******************************************

Bob Southard, e-Pro, Realtor ®, Solid Source Realty, Inc. Buy a home, Sell a home, in Powder Springs, Marietta, Kennesaw, Acworth, Dallas, Hiram,and Cobb, Paulding, Douglas, North Fulton, South Cherokee, County, Ga. Call me for all of your real estate needs.

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Bob Southard
Broker - Owner  Atlas Realty Service LLC #75911

O:678-439-SOLD(7653)

CALL ME DIRECT: 770-656-9134

Buy a home, Sell a home, in Powder Springs, Marietta, Kennesaw, Acworth, Smyrna, Dallas, Hiram,and Cobb, Paulding, Douglas, North Fulton, South Cherokee, County, Ga. Call me for all of your real estate needs.

Visit my website

www.AgentBobSells.com

 

bob@agentbobsells.com

Call me for all of your Real Estate needs

678-439-7653

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Comment balloon 4 commentsBob Southard • March 03 2009 01:25PM

Comments

I think this picture speaks for itself.

return on investment

 

Posted by Michele Reneau, Realtor, GRI ~ Charleston, SC Relocation Experts Team (Certified Staging Professional (CSP) Elite Instructor) over 9 years ago

Michele,

That is excellent!  Thanks for sharing.  The facts are much more dramatic than my simple illustration.

Posted by Bob Southard, e-Pro - Cobb, Cherokee, North Fulton (Atlas Realty Service, LLC) over 9 years ago

So true and with Real Estate at least you own something concrete that can't totally disappear (barring any natural disasters).

 

 

Posted by Jessica Wallace, Santa Cruz Realtor (831) 419-9345 (Coldwell Banker - Santa Cruz) over 9 years ago

Hey Bob,
Great Question!  I think Michelle's answer is the best answer to this question! Plus I am a visual person so just looking at the graph would determine my answer!  When you get a chance please visit my website www.ZilliantInnovations.com  Hopefully, we can help you with selling some of your properties.

Jason

Posted by Jason Darko- Tile and Grout, Tile and Grout Cleaning and Sealing- Georgia (Zilliant Innovations - Tile*Stone*Grout:Clean, Seal, Repair) over 9 years ago

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