October 31st, 2017 3:35 PM by Gregg Mower
Wow, the DOW Jones Industrial Average is over 23,000 and to think just 10 years ago it dipped to 8,000. If you are invested in the Stock Market, chances are you have done pretty well. So, when is the right time to take money out of a hot Stock Market and invest in Real Estate? My contention is any time, as Real Estate over time has outperformed the Stock Market in many ways. I know it is tough to give up those double digits gains in your stock investments year after year, but as you know there has not always been those gains and when you take out management fees on mutual funds and 401ks you might only have only had single digit gains or none at all. Not to mention unless you are invested in income producing stocks (stocks that pay a dividend) you generally have just realized equity gains or value increases. Real Estate has also seen double digit gains but the difference with Real Estate Investments are that you also receive rents, so you have appreciation as well rents received.
Every Financial planner will tell you that you need to be diversified with your portfolio, but what exactly does that mean? Well simply put you should have investments in the Stock Market, Real Estate, Gold, Bonds, etc.. When you find yourself too heavily invested in one area you should spread out your wealth. If you can devise a way to sell some of your stocks that may have seen the bulk of their gains and are poised to have a correction and turn around and buy Real Estate, I think when the correction does come to the Stock Markets you will already have the hedge with Real Estate. When the Stock market corrects money tends to move towards Real Estate. If you are prudent and can see ahead, you will profit greatly when the correction does happen.
So what type of Real Estate Investing is for you? Most people know single family homes as they probably own one as the house they live in. But there are many other types of Real Estate Investment. Of course, you can invest in single family homes, but don’t throw out the possibility of investing in multi-family homes, Commercial property or even Notes. Single family homes are pretty straight forward in that you have one home one renter pretty easy to take care of. The only downfall is that when that renter moves out and you have the downtime to find another renter and fix up the damage from the previous renter. With Multi-Family homes you will still have income, however, if one renter moves out you have others still paying so you are still receiving income. In addition, with multi-family properties you generally get more rent per square foot over time. The Percent of appreciation you receive will vary from location to location on any property. With a commercial property you generally have better rents and better lease opportunities such as triple net leases where the renter(s) will pay their portion of taxes and expenses on their space. With a commercial property you get a different kind of use than that of a single or multifamily dwelling. You might have a retail building with shops that are only open during the day, or an office building that the tenants must keep up for their clients, or a warehouse, all of which bring in good rents but are very different in the up keep and maintenance and the ability to have the tenants pay for it.
You have to ask yourself if you are getting all the return on your money that is possible. If the answer is no then you should look towards Real Estate. It is a fact that the wealth of the top wealthiest people in the world have huge Real Estate holdings. Starting your investing in Real Estate can easy, first you have to come up with a budget for purchasing Real Estate. Unlike Socks (generally) you can leverage Real Estate to get the most for your money. As an Investor you don’t have buy property outright you can get a loan against it allowing you to purchase more thus leveraging your investment dollars. Investors should obtain an operating statement from the seller when purchasing commercial properties as you need to know what the income and expenses are of a property before purchasing. Then you can apply your new tax base and your loan expenses and get an accurate income estimate of the property prior to purchasing. This is far easier with a residential Single Family investment home as you will know what the expenses are prior to purchasing as the renter will pay for their own utilities and maintenance, you will have to pay taxes and insurance which you can estimate pretty close prior to purchasing. One more thing you have to ask when placing investment dollars is when will the next correction be in the stock market and can you weather that storm before it comes back. Here at MAE Capital Real Estate and loan we love to help investors obtain investment property as well as helping them finance those ventures.