Home > General Topics > Economics > Is investing in real estate less time-consuming than stocks?

Is investing in real estate less time-consuming than stocks?

  1. I have done stocks but never property. However, it seems to me property investors don't seem to spend as much time on active investment compared to stock investors. Stock investors spend more time monitoring the market. So, is property investing more passive than stock investing? Passive means less time is needed.

    For a person who wants to release more time to do other things besides investing to grow his money, would real estate be a good alternative?
  2. Either one (stocks vs property) can be nearly completely passive or extremely intensive. It's entirely up to you. If you want to directly own rental property, I can almost guarantee this will end up consuming more of your time and energy than you expect at least initially.
  3. One can hire a real estate agent to help manage the tenants and look for tenants. Investment income will be lower but time and energy can be saved as a result.
  4. Exactly. A manager will eat a lot of your profit, depending.
  5. I own property and stocks. Property can be a nightmare dealing with renters, tradesmen, lawyers, utilities, taxes, damage, and realtors etc. Hiring someone alleviates the work load but also affects the bottom line. Day trading stocks is not good either. But using a proper strategy to harvest option premium and dividend works better. Plus it's liquid.
  6. If you have solid tenants (pay in full and on time and take pride and care of their home) and solid (well built and well maintained) properties then yes it’s a fantastic mostly passive way to make side income.

    HOWEVER- one bad tenant or money pit house will be way more headache than it’s worth.

    Quick example about one of my properties a few years ago-
    3 bed 2 bath, nice yard, very good school system and neighborhood.
    I had already denied a few potential renters for inadequate proof of income.
    Single mom and two high school aged kids dressed well looked like nice people come. Income was barely adequate, had a bankruptcy a few years before. She blamed everything on her divorce and gave my realtor a story about how her kids were going to have to leave the school system if she didn’t find a house in the neighborhood soon.
    I reluctantly agreed.
    Literally two days after she moves in she’s calling me hammered drunk in the middle of the afternoon complaining she didn’t like the paint color in some rooms (which hadn’t been changed since she saw the place two weeks earlier). Needless to say it was just the tip of the iceberg.
    She was late on the first two months rent then stopped paying altogether. She would call/text me a few times a month with bullshit excuses and many many drunken slurring rants about basically nothing. When I threatened eviction she started sending me pictures of a dead mouse on her kitchen counter and said I was making her family live in poor conditions! Now mind you, I had saved every text and VM this woman ever left me. At no point did she ever ask for pest control or any such thing. Anytime she asked for anything (plumber, electrician whatever) I had somebody there within 24 hours, even after she stopped paying rent!

    It took a couple of months to get a court date for eviction. Turns out she was basically a professional “rent scammer” for lack of a better term. She knew all the angles and would bounce from rental to rental living for free until she got evicted. She didn’t even show up for the eviction hearing because the court knew her!!
    She left the house in complete disarray.

    All in she cost me 6 months of rental expenses, multiple half days of missed trading to attend lawyer/court meetings, thousands in cosmetic damages, and countless headaches.
    After she left I rented the house to a nice professional couple who have paid on time and in full every month, and have called me twice in two years for maintenance (once a plumber for the toilet, once for broken refrigerator).
  7. I do both real estate and stocks. Real estate was first as it is what my parents did. I've self managed and hired managers. Hiring managers is only the way to go if you have no alternative. You will pay their fee, they will give repair work to their preferred guys-not always the best or cheapest-

    Time was is tough to calculate but I do have much less aggravation with stocks. No clogged toilets, no chasing the deadbeat tenants for the rent etc.

    I trade and buy real estate for income. If one is buying for long term appreciation, I would stick with stocks and build a good dividend paying portfolio with minimal rebalancing. Best of both world's IMO and what I would do if I could turn back the clock.
  8. Screen, screen and screen some more is absolutely money and time well spent.

    I do the eviction thing differently now. I get 2 of the biggest guys from the gym. They knock on the tenants door (I also provide a key). They ask what the old tenants are doing here and show them a lease with the gym rats names on it. They demand the old tenants leave and even offer to help by putting the stuff out on the curb.

    Very effective, the courts not so much.
  9. No! Not if time saving and ease of obtaining a meaningful edge is a top priority.

    One can have a nice longterm stock investment by simply investing in one or more very low cost ETFs and hold for 30-plus years, as Buffett has recommended.

    Better, in my opinion, is buying Warren Buffett's company Berkshire Hathaway and holding for 30-plus years.

    I am not advising people on the wisdom of investing in real estate and there are many ways to do this with advantage if you have the time and skill.

    I am saying that it is far easier and FAR less time consuming to smartly invest for the long term through stocks, since these seem to be critical criteria to you.


    With stocks, it would be prudent to expect your investment to lose over half it's value at least once durring a long time span.

    Be prepared to hold no matter how much the market may crash and add periodically as you come into more investment money, regardless.

    With real estate, one is often highly leveraged so it is easier than many think to go belly up if you do not understand things.

    It is easier for the unwary to fall prey to scams along the way.

    However, for the right people there are some good real estate tricks:

    A young person starts out by buying a three bedroom house and rents two.

    A good scout and negotiator finds desperate people on the verge of losing their property (or simply ignorant people) and picks deals up at a steep discount.

    Etc.. and so on..

    For a smart 30-plus year stock investors, there are easy ways.

    But Doing Well Is Not 100% Guaranteed In Either.
  10. Like any investment you need to ensure you understand and manage your risks.

    In property your risks are interest rate rises, over leveraging, non-payment of rent, damage to property and of course the time needed to manage people and your properties. Ensure you don't over-leverage, you can obtain insurance to cover non-payment of rent and property damage. Ensure you have a good team of maintenance people should anything go wrong.

    In stocks, the risks are more obvious and can be negated via adequate diversification and hedging.

    Half of my assets are in property which I rent out, I have pretty good leverage which provides a decent return on my initial investments (10% excluding capital growth)

    The other half of my assets are in actively traded stocks, via leveraged (CFDs), I'm adequately diversified (globally) and also hedged (long/short)

    Which is easier? The property portfolio provides a regular income stream, and growth of capital. The stock portfolio is purely for capital growth. Each took skills and time to learn the ropes, but together they have allowed me to retire at 46.

    In terms of time, property has spikes, i.e. when a tenant leaves, or if there is a problem. I do all this myself to keep costs down, plus I quite enjoy meeting my tenants and getting to know them, the majority are decent professional people who just want a home. For stocks, I've got automated processes to manage my portfolio, but I would say stocks is more time consuming than property since I'm always tinkering :)
  11. I have toyed with the idea of owning rental property. My conclusion was that once management/taxes/upkeep taken into account the residual returns are the same or lower than broad equity in risk adjusted terms. My main gripe is that you are buying X properties with a variety of idiosyncratic risks, a lot of which you can not mitigate. Location is one - you buy a place and next thing you know the city decides to build a garbage processing plant next door. Or, for example, my apartment is in a building with the dumbest condo board in Manhattan and keeps bleeding money.

    So if you want exposure to various forms of real estate, the REITs market is there for you. There are exceptions to this, probably, but they require some real value-added from the investor. Like a handy guy can try buying distressed properties and renovating them.
  12. It solely depends on the person. Each require specialized knowledge, a learning curve to achieve it, and a commitment to succeed to weather the countless things one did not anticipate.

    In real estate, money easily flows to well structured transactions created by the well-informed. Property on the path of development will appreciate magnitudes above properties that are not. Distressed properties have a higher money velocity to the above. Creating, buying and selling paper have even higher money velocity.
    A couple of common mantras;
    Flip until you can sleep, then keep.
    You make your money when you buy and get paid when you sell.

    Ugly houses, pretty houses, deals on wheels, trading paper or commercial deals. Each is a specialty and require focus to find the one thing that makes or breaks a deal - the motivated counter-party.

    With all that said, I never woken up to property value disappearing overnight but have to companies declaring bankruptcy while long the stock.

    In contrast, I’ve never woken up to property value doubling but have to afterhours news favorable to whatever current positions being held.
  13. the same advice goes for a company hiring employees. leave a position vacant until you find the excellence you are looking for.
  14. I almost pulled the trigger on buying some income properties last year but backed out.

    I felt it was too much work for a 10% return on investment. I can do better than that in my stock investing for sure.

    The investment properties in my area are usually old and decrepit with deferred maintenance and improvements involved which would probably reduce the long term ROI to 6% or so. And after you pay Uncle Sam you'd be barely ahead of inflation.
  15. You want to purchase multifamily buildings in areas with brisk economic growth and reasonable valuations (typically in red states). Then find quality tenants, and be prepared to roll up your sleeves. Good luck.
  16. One thing with stocks is it can dip by upto 100%. That's not true with real estate. You can have bad tenants or even no tenants for few months. Real estate can also be a "headache" to get rid off unlike stocks which can be done with a single click on the computer.

    Long run, real estate pays 5%/year for appreciation plus what ever you can earn from "net" rental income. If you are handy and keep on upgrading your handyman skills then real estate can also be fun.

    Also, have a back up in case you need to "harass" some bad tenant out without going through grinding eviction procedures. A bad handyman type tenant can also "mess up" your property in ways that you incur several thousands in charges. Also, pro league bastards can also have a lawsuit on you for "this or that" happened inside the property and they got hurt etc. That will really take your night sleep and pile up on aggravation.

    Alternative is to get a good REIT and invest via tax free accounts. 8-9% returns with tax free build up can be good in the long run.
  17. Thanks for all the replies. Seems that my original premise that real estate investing taking up lesser time than stocks is wrong.
    Nevertheless, I do observe more property investors making money than stock investors. Most people who touched stocks that I have spoken to lost money. Not true for property investors. No statistical evidence, though.
  18. I think a big point many people are missing here is the diversification aspect of owning a few rental properties.
    Of course 6-10% a year rental return seems like a bad use of capital in a 9 year runaway bull market . However you have to remember the stock market (S&P and DOW) basically went no where for a full decade from 1999-2009 (and NASDAQ got slaughtered).

    If I could give one piece of advice to any young people it would be this-
    No matter how great you are at trading or whatever else you do, having side income from other businesses/projects will help weather any rough stretches.
  19. Instead of owning a few rental properties, the alternative is to own REITs which offer even more diversification as well as high interest income too. With REITs, I wonder if it makes sense to invest directly into property anymore given the lesser work involved.
  20. The problem with REITS is they are too correlated with the stock market.

    Other things to think about rental properties is that rental prices will keep going up. So your yield will increase the longer you own the property.
    Also many favorable tax advantages as well as the unbeatable 1031 Exchange!
  21. Calling bullshit on this. You can’t legally execute a new lease without a finalized eviction.
  22. And many states this practice is illegal and you can be sued for what is left for remaining of the lease. In other words they have to find something else and you be paying for it, pain and suffering. You can't provide the stooges a key as it is against the law on fake lease and they would tell police you put them up to it to lower their jail time and increase yours.

    I started very young at real estate as an Uncle showed me the ropes where the money was and how to get rid of troubled tenants, offer to pay tenants $500 if they leave it intact, I never had tenants not pay on time as lease said rent was $800 but if you paid by the first you receive a $200 discount. Leases always said tenant not allowed to fix anything and if plumbing problem the expense was theirs by licensed plumber. I went different route, all homes bought at discounts in lower middle and higher low income areas and I only rented to HUD tenants, they destroy anything and government pays plus they pay most of the rent. Every three years I would make some type of improvements so tenants knew they not just an address. You learn much about first twenty houses on fixing everything, you stop buying one's of anything and buy 50s, at some point you have to hire maintenance staff and become a broker. At the end I was buying 4-6 houses a year, it becomes a business like anything else. You put 15% down and tenants pay other 85% and you get capital appreciation, had to think this be like your huge nest egg when you retire. When you start early, buying $20k houses then are now worth $120k in 30 years. Doesn't sound like much, but when you buy a ton of them, really adds up. Never tell tenants you are the owners, I always said I managed units, less of people asking for unrealistic upgrades.
  23. May be some viability in this strategy but it is also taking "leverage" to very high levels. RE tanks or economy goes into slowdown and you are talking several months of vacant properties.

    Also in real estate ownership one does not know the "invisible expenses" that are incurred while running the ops. Worst invisible expense is the "mental stress" (bad tenants, bad property needing repairs, property management issues like corrupt condo management etc.) which creates inefficiencies in other areas of life like main profession, family life etc.

    Would prefer REITs invested via tax free accounts.
  24. Investing in real estate is a big area. There's more areas in real estate than just owning an apartment building that requires dealing with tenants and managers....rental properties.

    Some go the route of real estate investment groups, real estate traders (lots of TV shows about this) and there's many other areas of investing in real estate.

    Most of the people I know that's involved in investing in real estate...they sort'uv got involved not intentional (e.g. inherited...homes, land, property).

  25. Red states? No. Weather, wealth, and work, red states have none. They get tornadoes and hail and hurricanes. Fire losses are more expensive to insure because the building materials are worth relatively less when they're built into a building. Heat and humidity bring mold and pests. Employment is more itinerant and if you're tenants' pay stops, so you does rent (states like TX and ND have high paying energy jobs that prop up income stats, but these are boom/bust jobs).
    HUD tenants? No way!

    Find a hipster on a fixie and follow him to your next real estate investment.

    Buy the big blue metros. Higher rents means better tenants. Higher per sq ft values means lower maintenance costs and smaller insurance claims. If you shell out for location, your revenue is based on property values, while you maintenance and costs are based on building and lot size. The only thing you give up here is diversification, but insurance mitigates the worst of that.

    Real estate is amazing. The cost of a property manager is a drop in the bucket (I insure a ton of property owners, and the ones using property manages more than cover the commission on increased rent). You get both income and appreciation. Had I been renting it out from when I bought my first property, it would have outpaced my investing account (which outpaced IRA and 401(k) mutual fund accounts handily). Also, you get tomorrow's value at yesterday's prices in mortgages (never mind the awesome deduction).

    I'm probably bias though, because I bought my first in 2009 in Denver. Had I bought even a year ago, though, 10% would still be rent less expenses here, with appreciation above that.
  26. I suspect that a lot fewer people are earning on real estate than they claim to be.
  27. I have gone through these a little while ago. There are pros and cons, obviously. If you own physical real estate, on one hand you are not marked to market, but on the other hand you are completely illiquid. You get nice tax advantages but your transaction costs are from 8 to 10 percent, which is a pretty high bogey to beat. Also, you end up putting a fair amount of money into a single asset with it's own idiosyncratic issues that you might not know in advance - real estate taxes might go up, house might have hidden termite damage, there might be a flood or a hurricane etc.

    I think that real correlation of real estate prices with the stock market is also high, as evidenced by the forced sales during the market down-turns. It's harder to observe since real estate more or less ceases to trade when the times turn bad. RE is very resilient in specific areas, but the rental yields very low. My apartment, for example, at the current valuation would fetch a yield of 2.1%.

    That's true about REITs too - the only difference that your yields are more or less static and instead you will see appreciation in the asset itself.

    Yes, that's for sure. Unfortunately, it sounds like some of these are going away now, no?
  28. Call BS all you want. I KNOW what I do from time to time.
  29. Was this between your stints as a trucker and master trader?

    Another wannabe story.
  30. Anyone dumb enough to break the laws and remove tenants illegally with thuggery are guaranteed to lose their ass in court & could end up in jail, at least in the U.S.A..

    I once had a drug binging land lord in foreclosure threaten to have his Armenian friends forcefully remove tenants with baseball bats while they were sleeping which was recorded on multiple phone calls - dumb move! All the tenants were working professionals paid up & on a lease. We all had attorneys. The land lord was thrown in jail for terrorist threatening & was forced to pay $10,000 to each tenant which he did.
  31. Real estate (and business management in general) is a pain in the butt compared to ...dabbling...in the market and stock and options.

    Real estate has non-stop issues: no liquidity...could take months and years to sell. Problem tenants. maintenance/overhead. etc etc
  32. Yeah your story of professionals able to supply a current lease and demonstrate they are paid to date with recorded phone calls is exactly similar to what I do.

    Except these tenants aren't professionals, couldn't find their lease if their life depended on it, are behind on payments and have received notice.

    Yup, exactly the same.
  33. If I had to do over again and knowing after so much time invested in learning to trade commodities profitable, I would have done real estate in different way. But being that a relative did real estate, gave me start up monies and ton of his experience, it was no brainer to buy in certain ways. But no matter how much you plan, problems occur as you wrote and some months I was handing over my gov't checks to mortgage companies. I specialized after that and stopped buying middle income homes and stayed in lower mid income to higher low income and seldom had problems as I once started. You learn eating beans no fun. I always bought properties as if I was going to move into them one day, so unless it was close to free, didn't buy major stressed homes or gang land areas. But at the time I was putting down $5500 and good 8 years before attempting to learn day trading, seemed to be the thing to do. I grew up with relatives who for most part were craftsmen of home building, worked my rump off for free for them to learn how to do for myself. Education is seldom free. Worst deal I ever done was buying 160 unit apartment complex, was so happy I was getting huge discount, then 911 happened and 90% of tenants went to war, never dawned on me they could leave when they got orders. Went to the bank that held the mortgage and they certainly didn't want it so they worked with me, by then I had many other properties and solid relationship with them. Two years later found a buyer, and basically lost, another lesson, you find your niche, stick to it.

    I never "earned" while owning them, depreciation certainly helps so you can breakeven till they get paid off, but at some point, you can't depreciate land value and inflation the rents don't go up as much as you like them to be. Being I reside in city with huge military bases, always shortages of homes, which has even larger shortage of HUD quality homes, houses seldom vacant. You have to know so much like in trading.

    As far as Quality of life, grew up certain way and that was always be working, divorced long ago, can't have kids, no siblings and parents past long ago. Not happy unless I am working, and most of the time, most consider me to the biggest asshole around cause look at value differently than most, seldom ever going to overpay, believe in balance but won't cheat anyone on purpose/make it right if done without knowing. Those who have worked for me either quit and say I am an a-hole and if they worked hard I give them very good references. Not here to be a fucking friend, it is business like anything. You don't like me, am glad.

    And if tenant asks for copy of lease, most states require owner to give them a copy.
  34. It's a 2 way street for sure - renters need to do a background check, check references, etc on their 'land lord' before signing a lease since their is no shortage of bad 'land lords' out there not to mention a lot of scandals.
  35. I've rented nearly all my life and still do.
    The upsides are:
    Easy to move house and follow the jobs whereever the jobs are - quite important these days.
    No maintenance issues, ie someone else pays.
    Not tipping money into RE fees (R.E. commissions when relocating) or into morgage interest.
    Not wasting money doing stupid house renovations (bottomless pit) There is no temptation.

    Having to deal with stupid RE companies who want to regularly do house inspections.
    Having to deal with stupid RE companies period.
    Have to pay rent. Bugger!

    Conclussion: Renting is ok but make danged sure the time you save by renting is time you spend on investing in the markets which I believe is a better bang for your bucks and time.
    Trading is more fluid and the fees are lower than investing in bricks and mortar but while the downside of renting is dealing with RE companies (bone lazy employees in a bone lazy blood sucking industry) you don't need to deal with 95% idiot tenants when attempting to rent out and make a buck.
  36. Dealing with people like tenants, employees, contractors, government issues and then with unpredictable events like 911 that you mentioned, new bylaws, illiquidity when wanting to sell etc. is too much headache.

    What happens when one of the units has a drug dealer living as a guest and there is a SWAT team visit. Depending on local laws, landlord can have to face court battles to save his unit from getting taken over by the government.

    Would be happy with 7% annual in REITs, Index ETFs and also be able to keep a main profession plus peace of mind. Can allocate 20% of portfolio into growth/trendy stocks and take a dive into sector plays also.
  37. Until someone you did not rent to sued you in court for racial, age, gender... discrimination and you have to pay triple damage.:finger:
  38. %%
    Plenty of opportunitys in both.I like land+ stocks better , as a banker named it ,better ''panther piss '' on the woods than rental carpet/pets.LOL:D:caution::caution::caution::caution::caution::caution:I lost more in options than REALTY + stocks,; so i dont do options anymore
  39. Its a little ironic that I saw this post. I just got through reading an article about day trading on a realestate site called bigger pockets. One of my former students commented on the article which is what drew me too it.

    As for the question, it depends. Just like there are different styles of trading there are different ways to do realestate. I do mostly commercial properties and high end residential. Here is my quick take on the work load.

    Flippers. These are the most work intensive and hands on of the styles. They are in and out quickly. They have to be since most of them are using hard money lenders to aquire the property.

    Residential landlords. Not as labor intensive as flippers but be prepared to get your hands dirty. The revenue stream is thin and you will not be able to pay contractors and vendors for anything that you can do yourself.

    Commercial. Its a world in itself but the returns are very high. The workload comes from conducting due dilligence (extensive) and the complexity of the deals. There is also a significant amount of travel involved. That may sound ok but travel is work.
  40. I've done rentals all my life. Specialize. Yes, middle income and lower. Don't want families with kids or young people as a rule. Older people are more stable and quieter. So I like small units that don't attract more than a single person or a couple at most. It is more profitable not to have it rented than to have a problem.

    My places ...run as 'family'. Most of my tenants stay 7 - 8 years and longer. This business model works for me.

    Like Handle said also, there are a lot of skill sets necessary to keep these kinds of things going. It is not easy.
  41. Flippers: Unless you get a property at a deep discount, it makes sense only if you and family member or partner do 80% of the work and quickly. Would further help having a real estate license. Otherwise, it can be very tough margins and soon the carrying costs for "not selling" property can throw you into red. There are also flippers who gut down the property and build a 100% new house. That can ask for some serious investment and expertise in building houses.

    Residential Landlords: Agree with points but landlords should lobby for evicting tenants within a month. Laws are such that it can take upto 3 months to gain eviction and some places Landlord has to pay several hundreds to Sherrif to conduct the eviction. Given how busy the Sherrif is, this can take another few weeks atleast. Plus Landlord has to hold on to "loser tenant's" belongings for 30 days before selling or throwing them in the garbage if tenant does not pick them up themselves.
  42. I agree. Thats one of the reasons that I moved into commercial properties. I invest in self storage and ALF s. And some high end residential. I think I will start winding down the residential properties pretty soon.
  43. ALF = Assisted living facility?
  44. I am sorry. Yes, Assisted living facility. They are actually great investments. I live in Florida and there are a lot of old mom and pop apartment complexes and motels that sit on great locations. We buy them and modify them to be used as ALF s. We then rent the property to health care providers that intern sublet them to thier clients. We just maintain the property. We get a good steady income and have no need to get involved in the day to day minutiae.

    Since the land is usually worth more than the building on it we will eventually tear down the existing structure and build something else.
  45. Never heard of a setup like that.
    Sounds incredible.
    Congratulations and thanks for sharing
  46. No problem.
  47. %%
    Renting is also perfect until you get to know an area+ not sure if i wanted to live in that place. i saw an old FED chart they were promoting an adjustable rate mortgage.I like paid for real estate, but like land more than most people, so overpriced houses dont do much for me. It did not really hurt the stock market, when FED raised rates from 1977 to 1980, to 14/+%. BUT 1981 did turn in to a bear market trend.LOL:D:cool:
  48. I'll bet RE has made more millionaires than daytrading has.
  49. %%
    I'm sure , but not a prediction, average RE buyer/seller puts in more hours, than average trader of stocks. LOL:D:cool:.Average RE commission can be an advantage......; any would/should be careful, if you knew seller had to pay 7% /+. OK= owner agent has to disclose + gets around that LOL
  50. You can hire a property manager but they don't always have your best interests in mind. They won't take the time to get the best bid when hiring a contractor. They just hire whoever they are familiar with.

    Everyone I know who ever invested in RE, including myself, eventually encountered a deadbeat tenant. You'll lose 2-4 months rent for each deadbeat; plus they usually trash the property.

    Don't invest in RE unless you have a strong personality and good interpersonal skills.
  51. %%
    And after some one turns 30 years or older-might as well do something you like. I helped a landlord + sheriff put a renters stuff on the curb, did not like that, even with sheriff there.Like IBD notes ,stocks are more liquid. LOL. Both have made many millionaires:cool:
  52. Exchanged traded REITs have performed very similarly to physical real estate over decade long time periods. I'd understand if someone is a developer and can add value to property they can generate extra returns. For someone who purely buys real estate to rent it out passively it's hard to argue physical is better than residential REITs, assuming both are fairly priced.
  53. Not when you factor in tax advantages, cash paying renters, and the unbeatable 1031 exchange.
  54. I agree. Most of our Reg D investors are as interested in the tax savings as much as the profits. The 1031 exchange benefits are also a big draw especially with the new tax plan coming up.
  55. %%
    Good points; but really depend on location. Even the WSJ had an article about Korean banks doing much more crypto currency inspections LOL. But back to your points, its strange how many REITs under--perform-actually amazing...........WE dont have gov rent control or excessive high prop taxes, in the south