Dividend Stocks vs Rental Properties

[Yinzer]

Wow. Honestly if I had read a thread like this 10 years ago I'd possibly never have gotten into rentals. Sometimes ignorance is bliss. Steveny, you earn your returns, and well deserved.

Such good info here though. Glad to know I'm not the only one using up 1/2 of my vacation days for RE and driving a 10 year old car in front of the tenants. Well I'm so smalltime here by comparison I'm running out of things to add but love the read and hope to pick up some new best practices. Master key agreed, one of the best moves. Went with Kwikset knobs with replaceable cartidges so you can re-key a unit in 5 minutes. Also when something goes bad like a microwave or bigger appliance I'll at least peek on craigslist quickly before heading to Sears scratch & dent (where few are really ever scratched). I've had good luck finding ads where a couple moved into a new house and the wife wants matching red $$$ LG washer/dryer instead of the perfectly fine and basic white appliances that are new or just a few years old and 1/3 cost of new. Some husbands have practically given away an appliance is if to spite his wife or something. All walls and ceilings in all units are 1 neutral color and all trim and doors are 1 white. In addition to touch-up painting during turnover I'll completely paint 2 or 3 walls in each unit and after a few years the majority of a place is repainted. Change all air filters yourself and never rely on tenants ever. Will spray their showers with scrubbing bubbles Mega foaming cleaner as secret maintenance when I know they're on vacation since no tenant ever clean their shower walls. Will peek under every sink during any visit to look for any signs of dripping early because they rarely care. Treat those occasional effortless perfect tenants right with reduced under-market rates when it makes sense. Pay $100/year to a local landlord service with attorneys if available, who sell fully updated leases complaint with local laws for a few $ per set and do all screenings thru them. Forward to a local landlord those rental inquiries for which you don't have a unit that would work. Been getting paid back with leads lately, always helpful.

Well I'm out of spit and hope for more good tips from others that are different or better than my methods and more school of Steveny tomorrow or later this week. 'Night

 

[myw]

Robert Kiyosaki's next best seller 'rich home poor home' will be sending its 'sales derivatives/outward cashflow' to both steveny + yinzer here.

 

[Vega$ NSX]

Just some food for thought. Of all the "rich" people that I know personally, here is the pecking order on the primary way they generated their wealth (in the order of wealthiest to least wealthiest):

1) The wealthiest people all generated their wealth through an entrepreneurial endeavor (i.e. business, company, invention etc.)
2) Real estate
3) Stocks and other investments

Now keep in mind, all of them had a good asset allocation mix across all three, but in varying percentages. Again, I focused on the primary method of their wealth generation. Note that those at the top of the list (entrepreneurial) were people I would call "crazy" rich (multi-millionaires) as compared to those who used stocks and investments, who I would call rich, or very well off.

So a very interesting thing can be derived from this. Do you notice the common trend?

The trend is that the higher up on the list the higher percentage of money was invested in themselves to grow that money. In other words, if a person only invested in stocks, bonds, commodities, etc. they are putting money in a place where there are many other individuals and factors to decide how much that money can grow. They are somewhat removed from the process. When you step up to real estate, you start to have more influence and control in how well that money grows. You have to pick the right real estate, time when to buy and sell, deal with tenants, know how much to charge etc. Finally, at the top of the hill, when you start a business, develop a company or pursue a venture, you invest all that money in yourself. You take full control and ownership of that investment.

To go along with that, there are many investment traders that can make a mint in stocks, funds etc. even thought I have it on the bottom of the list. However, what's the main difference between them and a person who just invests in the 401K, IRA, mutual funds etc. Again, the investment trader is taking more ownership of the money. They invest in themselves and are actively involved in the how that money grows, as opposed to the standard investor who just supplies the money and sits back. They are as much of an entrepreneur as the guy that starts his own company. That's what makes them different than your standard investor who has some level of ownership in picking the types of funds and allocation mix, but for the most part are a passive participant.

So the question is, how much faith do you have in yourself? Knowing how much faith you have in yourself will help you decide how much to allocate to each risk level. Not everybody is a Richard Branson or Bill Gates, so those people should put more into a more "hands off" investment. But some people who are those personality types should invest more in themselves or they will hamper their growth potential by sticking to a passive investment. A good example is a coworker of mine was the conventional type that invested in only 401K, mutual funds etc. whereas I encouraged him to invest in real estate and with himself and I was doing. Today while he is "doing ok" I have sky rocketed past him even though we started roughly at the same place and made roughly the same income. But having said that, he's not the personality type to take on that level of responsibility and so his investment manner was probably the best for him. However, had I followed the same path, I do believe I would have cut myself short of my earning potential had I not invested more in myself.

 

[myw]

when i look at the above 1,2,3 list imo you cant control the market, or real estate (while they both have amazing opportunities to make money) ... but you have 100% full control on how much money you can make for yourself. my entrepreneur friends say that all the time while my rat race friends scratch their heads at that statement.

the other thing i've noticed is that alot of the top of the class types back in university who are now doctors/lawyers (now working well paid 'jobs') aren't nearly as a successful as the not-as-good students who kept dreaming, creatively started businesses (which a few of them failed) but kept trying. of course the 'good students' got off to a better start, but their incomes/potentails and hence earnings we're more predictable. while the entrepreneurs (at least the successful ones) over the course of 5-10 years caught and and surpassed doctor/lawyer/day-job types.

in my circle, the most successful self made young people i know follow exactly that same path above. my 'successful' doctor/dentist friends are all entrepreneurs running their own practices vs. simply working for the boss in the hospital/clinic.

imo you are your potential (this is why i had already guessed your success from prev posts, actual quite a few on prime i look up to here... smart successful people both young and old)

 

[Vega$ NSX]

the other thing i've noticed is that alot of the top of the class types back in university who are now doctors/lawyers (now working well paid 'jobs') aren't nearly as a successful as the not-as-good students who kept dreaming, creatively started businesses (which a few of them failed) but kept trying. of course the 'good students' got off to a better start, but their incomes/potentails and hence earnings we're more predictable. while the entrepreneurs (at least the successful ones) over the course of 5-10 years caught and and surpassed doctor/lawyer/day-job types.

This couldn't be any more insightful. A co-worker told me that in college a person came to speak to his upper level engineering class. He had all the "A" students stand. He said, all of you will go on to get your masters and/or PHD's and make a modest living. Then pointing out the "B" students, he said all you will work as engineers, have long careers and make a decent living. He then had the "C" students stand and said, the fact that you made it though engineering school means you have commitment and smarts. However, being "C" students, it means you will go on to be contractors, business or salesmen and you'll make the most money of them all.

He also pointed out that the D and F students wouldn't be there the same time next year. :smile:

 

[steveny]

This couldn't be any more insightful. A co-worker told me that in college a person came to speak to his upper level engineering class. He had all the "A" students stand. He said, all of you will go on to get your masters and/or PHD's and make a modest living. Then pointing out the "B" students, he said all you will work as engineers, have long careers and make a decent living. He then had the "C" students stand and said, the fact that you made it though engineering school means you have commitment and smarts. However, being "C" students, it means you will go on to be contractors, business or salesmen and you'll make the most money of them all.

He also pointed out that the D and F students wouldn't be there the same time next year. :smile:

Oh yes but the contractor has to get his hands dirty and can't wear a suit all day looking "cool". The richest friend I have is worth at least 100 hundred million. He stinks to high heaven, wears the same overalls day in and day out, I've never seen him with clean hands every time I bump into him at Home Depot. He's almost 80 now and still working everyday. He's also landlord.

Another wealthy guy I know owns a plumbing company and he also owns a lot of rentals as well. He still goes out and works everyday cleaning sewers driving around in a dented up rusty stinky van.

My neighbor who I don't know too well maybe talked with him several times, he's a billionaire also a landlord, commercial landlord. Within a 1/2 mile of me there are several people who are also very wealthy all of them are landlords except one and he owns a scrap yard where he works almost every day. He just finished building his new house up the lake and dropped 32 million dollars on it. Its a pretty nice place, he only uses it on the weekends, also has a place in NYC that's worth around 50 million. He's constantly in the news donating or raising money for donations for the needy. He just dropped ten million on a restaurant that gives all profits to the homeless and hungry. Needless to say when he and his vogue model wife drove by my house in his rolls ghost one day and gave me the thumbs up it really made me feel good all over. I guess I was doing a pretty good job trimming my hedge, lol.

The billionaire neighbor lived a regular life into his early forties. He raised his kids, worked a job etc. When the kids went off to school he put his nose to the grindstone and got his company going. He just finished a 550 million dollar commercial building. So it's never too late to get something going. He also drives a ten year old car, not sure why as everyone knows him he's like a celebrity around this area. Granted the car is an A8W12. He's currently building himself another house to the tune of 50 million. The guy who calibrated my home theater installed his and said the neighbors is the nicest theater he's ever worked on, which says a lot because he's the only theater guy around here.

What most all these guys have in common, no college and some didn't even graduate high school. Time is your most valuable commodity and the one thing that can not be duplicated. If you get out of high school and spend the next four or more years accumulating debt how could you catch up and pass the person who spent that same time making money, not accumulating debt and if they are doing it right putting money aside? Compound interest is very powerful and only get stronger with time, just like rents but not like fixed rate mortgages.

Don't get me wrong I think education is very important but college will give you knowledge it is not going to give you wisdom. You are either born with wisdom or learn it from experiences, it's not in a text book. My sister was the valedictorian and has a Phd. from an Ivy League school. Her income will always be limited by who she works for regardless of the effort she puts in. She could put in minimal effort and probably still make the same pay, mammoth effort maybe a big 5% raise! woohoo. But using this equation she can easily figure out how her entire earning career will go, wheres the fun in that? I did ok in high school but it wasn't for me. I needed to make money because as most people know here I grew up broke, without running water, electricity, phone, car, etc. that's also says a lot for my sister who was able to put that all aside and get through school with excellent grades. My mother use to always push me to get a job, and I'd tell her I didn't want one. At the time she probably thought I was lazy but I didn't want to have my future limited by a job.

I did actually get a job for a while, what one would consider a real job. I delivered pizzas for a while too but that not a real job. My real job was at a hospital. It didn't take me too long before I was on the edge of insanity. My co workers would say things like, stop working so hard you're making the rest of us look bad. I was always asking the boss for more to do. I once finished a list in two days that was suppose to last me the week. Instead of my boss being happy he was annoyed. I was at the time getting my company going and since it didn't seem they had much for me to do at the hospital I'd call in when I needed to get something done to expand my business. I put me first. I suppose my boss did need me to be another person he had to manage in order for him to get a bigger paycheck. That's probably what it was. But IMO that department could have operated with less than half of the staff it had. Most of the people who worked there were lazy and also thieves who stole from the hospital. I made the boss aware of it and he did nothing about it. One guy would order supplies he needed for his plumbing business and take them home. It pissed me off to say the least. I don't have other job experience to compare this too so maybe that happens everywhere idk. That still doesn't make it right!

Anyways IMO its a kinda funny but sad story. I did not know this at the time but my boss was also setting up rentals while he was working at the hospital. Unfortunately, he failed to make them his priority and instead made the hospital his priority. Because of this his rental business failed, he lost all his property including his primary residence to bankruptcy. This happened about three years after I left the hospital and I knew it because he walked into my office at one of my apartment complexes and rented a town house from me. Not too long after moving in he also went through a divorce. His *job* cost him everything.

Edit, after posting this I realized the wealthiest good friend I have is not involved in RE at all other than property his dealerships sit on. He's worth close to a billion, I think 900 million last he counted it up. Runs a huge chain of car dealerships and a vineyard amongst other various businesses' and does in fact have a master degree. He also has the benefit of a very large family who work together at the same goal and they are damn good at it. He's probably the most accessible wealthy person I know. The very first thing you hear on the voice mail for any of his business' phones is his direct personal cell phone number which you can call to complain or compliment. Needless to say everyone who works for him knows this and his phone does not ring often with complaints. I think this is an excellent business practice and keeps him in touch with what's going on day to day.

 

[RPM217]

I handle money for a living, and it never ceases to amaze me what people do, what they earn, etc. It blew me away when I found out that a hair colorist at a NYC beauty salon makes over $250,000 per year, and a few of my doctor clients make $150,000 per year (yes a few make many times that as well). A doctor today will graduate with a few hundred thousand dollars in debt, the colorist, not anywhere near that. It'll take the doctor quite sometime to pay off all of that debt, while the colorist enjoys the fruits of her labors. I have a retired veterinarian that's worth well over 20 million dollars, and a retired lawyer who had a goal (met I might add) of having $1,000 per day in tax free income. Most people don't "plan to fail, rather they fail to plan". Whether you invest in real estate and manage it yourself, or hire someone to run it for you, or invest in stocks (pick them yourself, or hire someone to do it for you), discipline is paramount.
'Nuff said!!!

 

[steveny]

I handle money for a living, and it never ceases to amaze me what people do, what they earn, etc. It blew me away when I found out that a hair colorist at a NYC beauty salon makes over $250,000 per year, and a few of my doctor clients make $150,000 per year (yes a few make many times that as well). A doctor today will graduate with a few hundred thousand dollars in debt, the colorist, not anywhere near that. It'll take the doctor quite sometime to pay off all of that debt, while the colorist enjoys the fruits of her labors. I have a retired veterinarian that's worth well over 20 million dollars, and a retired lawyer who had a goal (met I might add) of having $1,000 per day in tax free income. Most people don't "plan to fail, rather they fail to plan". Whether you invest in real estate and manage it yourself, or hire someone to run it for you, or invest in stocks (pick them yourself, or hire someone to do it for you), discipline is paramount.
'Nuff said!!!

Do you agree that it's very important to understand options in order to effectively trade stocks? Do you have many clients who solely trade stocks and do as well as the ones who use stocks and options?

I see celg according to cnbc got hammered the other day. That thing has just been a freight train over the last year. What about this Icpt? Mammoth short squeeze going on there for sure. I set up for a downturn, fighting the tape . Totally missed nugt, had the order out there for 24.40 but it never filled and has only been going up since, maybe next time.

 

[RPM217]

Do you agree that it's very important to understand options in order to effectively trade stocks? Do you have many clients who solely trade stocks and do as well as the ones who use stocks and options?

I see celg according to cnbc got hammered the other day. That thing has just been a freight train over the last year. What about this Icpt? Mammoth short squeeze going on there for sure. I set up for a downturn, fighting the tape . Totally missed nugt, had the order out there for 24.40 but it never filled and has only been going up since, maybe next time.

Steve, as you know, I do utilize options quite a bit. For someone who's willing to put in the time, it's a great tool to have/use. I recommended CELG to you a long time ago. I'm out of it @120, but moved into GILD and I'm a happy camper. The ICPT wasn't ever on my radar, wish it was. Stock is out of control, I wouldn't touch it up here, hell I didn't touch it as I wasn't even aware of it. For many people that are reading a lot of this thread, most of the individual stock trades are not necessarily appropriate for many. ETF's and Mutual Funds, closed end funds are great ways of "positioning"a portfolio. I have learned in over 30 years in this business, that those that try and "trade" stocks, and time the market are fooling themselves if they think that they're going to "win". I tell everyone that I work in the biggest casino in the world, I don't need Vegas, or Atlantic City, Monte Carlo or any other "casino", I've got the stock exchanges. Many people try to diagnose themselves, utilize WebMD, and many try to handle their investments themselves. I don't go to a walk in clinic, hell, I will go out of "network" to see the right doctor, and pay through the nose for the privilege, your investment portfolio, or real estate portfolio, should be reviewed regularly by a "professional" as well. JMHO

 

[steveny]

Steve, as you know, I do utilize options quite a bit. For someone who's willing to put in the time, it's a great tool to have/use. I recommended CELG to you a long time ago. I'm out of it @120, but moved into GILD and I'm a happy camper. The ICPT wasn't ever on my radar, wish it was. Stock is out of control, I wouldn't touch it up here, hell I didn't touch it as I wasn't even aware of it. For many people that are reading a lot of this thread, most of the individual stock trades are not necessarily appropriate for many. ETF's and Mutual Funds, closed end funds are great ways of "positioning"a portfolio. I have learned in over 30 years in this business, that those that try and "trade" stocks, and time the market are fooling themselves if they think that they're going to "win". I tell everyone that I work in the biggest casino in the world, I don't need Vegas, or Atlantic City, Monte Carlo or any other "casino", I've got the stock exchanges. Many people try to diagnose themselves, utilize WebMD, and many try to handle their investments themselves. I don't go to a walk in clinic, hell, I will go out of "network" to see the right doctor, and pay through the nose for the privilege, your investment portfolio, or real estate portfolio, should be reviewed regularly by a "professional" as well. JMHO

I read this morning that steve Cohen has a one million share position in Icpt, he must be one happy camper for sure. With that said he won't make a dime until he sells. He must be smart enough to know the stock won't stay up here. Im watching for a large order to be placed and see how it fills. Idk if I'd jump in then but if I did anything with Icpt it'd be a very quick trade on the short side. The options are all over the place with hardly any volume. There have been arbitrage openings all day but none will fill, opportunities where its impossible to lose selling spreads for a ten gap that pays fifteen. Makes me want to push my enter button through the back of the keyboard, lol.

 

[docjohn]

lots of people have nash/nafl.......so much so that i think the hoopla is because those in the know realize the potential that will allow americans to eat like sh%t and not have to pay the piper getting severe liver disease.

 

[Miner]

Not sure if you given it any thought but if your good at making those types of repairs why not buy fixer uppers and rehab them into rental condition then take them back to the bank to get that sweat equity out. You can easily increase your money in a short period of time. Only borrow out enough to avoid PMI and use the equity you get out to pay off your primary. Continue to rent the fixed up house out, if its break even it's still a win as you will no longer have a mortgage payment on your primary and you'll have the tax breaks from the rentals. Its a win win.

Flipping works too. There certainly is a great opportunity to arbitrage this area of the RE market if you are liquid enough to purchase homes that others do not have the liquidity to purchase but they do have the 10% down the bank requires to purchase a property in livable condition from you after the repairs are made.

I hadn't thought about the refinancing to pay down the mortgage on my house, but will give that some thought. With a 2 year old, spare time to actually do fixer uppers is scarce right now, but hopefully in a few years I'll be able to do it. The market here in SD is getting crazy again, up more than 20% in the last year, but that is probably a good thing as when the market bottomed out in 09, it took offers on 20 houses to get one.

Miner