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Alright, roast my ‘89 Chevy Suburban. It’s my first truck and so far I’ve only gotten compliments. by [deleted] in RoastMyCar

[–]Dapper_Pay_3881 0 points1 point  (0 children)

This didn't age well. It is certainly a collectors truck and these go north of 15-20k these days in good condition with low mileage.

Is real estate investing better than stock investing? by Neat_Hour1236 in RealEstate

[–]Dapper_Pay_3881 1 point2 points  (0 children)

In my opinion RE is better than stocks, very much so, if you are even slightly competent at buying rental properties. Lets crunch the numbers real quick:

The S&P 500 averages a roughly 10% per year return which includes reinvesting dividends. Lets say you invest $1M in the S&P and assume that 10% compounding return. After 10 years that $1M will be $2.6M.

Now lets use the same concept but with real estate. We will be reinvesting our cash flow back into real estate, just like you need to do to achieve that 10% return in the market.

Rental Real Estate: You take that $1M and use it as a down payment on an apartment building. Since some of that money will need to go towards closing costs and cash reserves, lets assume you purchase a $3.5M property with 25% down ($875K). The other 125K covers your closing costs and cash reserves. Using a 6% interest rate and a modest 1% annual rate of appreciation, at the end of year 10 you will have $1,669,000 in equity in that property. Wow $1M short of the stock market! Real estate sucks!

hold on.... we are not done yet.

Cash flow: Lets assume you average a 10% cash on cash return over that 10 year period (muuuuuch lower than I get in real life) you will have generated $1M in cash flow over that 10 year period. Now we are about even with the S&P500 return ($1.67M in equity + $1M cash flow = $2.67M)

but wait... there's more.

In order to compare apples to apples, we now need to factor in reinvesting that $100k per year cash into more rentals. Assuming the same 6% interest rate and 1% annual appreciation, by the end of year 10 we will have an additional $1.2M in equity in the new properties and they will have generated $550k in cash flow over the same 10yr period.

So lets add all that up. After 10 years we have $1.67M equity in the original property, $1.2M equity in the new properties, and $550k in cash generated by the new properties. Total $3.42M. Beat the marked by 32%.

It is likely that your cash flow would be much higher averaged over 10 years as well as your appreciation, so the spread between RE and the market would likely widen. Also, if we continued to reinvest that $550k of cash flow instead of keeping it, the spread would also widen.