Quote:
Originally Posted by Rybar
Don't forget the value of the property your purchasing should increase over time if you are buying at a low point in the market. As long as you can hold for say 10 years it should increase for sure. Where I am things are sky high so it's tough to get get a good return on your investment. Rent basically covers expenses if that. But prices have been appreciating like mad over the last 10 years. (Basically more than doubled, I'd say 250% growth realistic)
The one main difference between property and stocks is property is illiquid, meaning you cant sell it quickly and get your equity out, stocks are liquid so you hit the sell button and they are gone the next day.
Maybe take Greg's advice and diversify. Have some income property and some stocks in your portfolio is a good idea if you can.
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Yeah, appreciation can vary (and you can be bit by it as I'm sure some were during the downturn), and while you can probably anticipate it to increase by about inflation (3%), I just consider it a bonus. I effectively bought equity as a house immediately next door sold for 190k, and a week after I closed a house right across the street sold for 220k. I seriously considered turning and flipping the house for an instant profit.
Good point about the liqudity of property. Another subtle distinction is that if you have an investment account and are re-investing your dividents (which you should be if that's your thing), it's all automatic. I may be getting 10% returns but the real power of investing is in the re-investing your profit. When I get 300$ in a month, I can't do anything real estate related with that money itself, so it's a good spot where the ideal would probably be to have it in some sort of higher yielding liquid account.
That being said the money will probably just go into finishing my car or building a shop, but I do save a lot of what I make in order to pursue things like this.