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bran987
New member
uhhhhhhhhhhh, who the F told you that a municipal bond will double your money in 5 years, FYI, that is a 15% AFTER TAX rate of return (in "real life" they pay about 3.5% after tax right now guys).rudeboyja said:
Also, who in the shit has made you all believe real estate prices never go down? You actually believe that it is really hard to lose money on real estate? I'm 25, and I'd like to have a heart attack reading a lot of the responses in this thread. Real estate is as CYCICAL and industry as they come. It moves in 7 to 10 years CYCLES. Do you all know what a CYCLE looks like? it goes UUUUP, and then it comes DOOOWN. Maybe I can help you guys relate to by thinking of steroids. You cycle them up, increasing increasing increasing dosage mmmmm feels good, then you cycle them down down down and you lose your muscle awww that hurts.
You must become familiar with history.
Past results are not an indicator of future performance. And who was it that said that the S&P fund will return you a "10% year after year, one year it might be -3% but not usually" or something which is TOTALLY WRONG AGAIN.
Let me show you again what the "real world" looks like:
12/31/95 37.45%
12/31/96 22.84%
12/31/97 33.31%
12/31/98 28.54%
12/31/99 21.02%
12/31/00 -9.08%
12/31/01 -11.87%
12/31/02 -22.11%
That, friends, is the end of a BOOM (or what you're more familiar with "BULL" market) and the beginning of a BUST (or yes, a "BEAR")
The market almost NEVER, EVER ACTUALLY returns 6-12% in any one year, that is an AVERAGE, that is why people say the stock market is "RISKY" short term.
There is only one way to truly be an investor, and that is to learn what the INTRINSIC VALUE, (look it up) of the asset you are buying is, and buy it for LESS. That is the only way.
Buying a condo in South Florida for $500,000 because they've been going up, in the hopes that there is some other scmuck out there who will buy it from you in 2 years for $600,000, is SPECULATION, it is GAMBLING. Do you know how you should truly value that piece of real estate? You should take that purchase price, figure out your monthly mortgage payment, check rental rates in the area, and see if the monthly rent payment will cover the mortgage payment and give you a positive monthly cash flow after all expenses are paid. If you can do that, and you find the mortgage is POSITIVELY GEARED (meaning income > expenses) you have a piece of real estate that you should CONSIDER buying.
Land? Works the same way. What is the INTRINSIC VALUE? What is it's highest and best use? How can you find it? Well appraisals are a start. They will run you through sales comparables, show you what others have paid for land in the area, what a developed building on the land is worth, etc. etc..
Again, all I stress is, buying because something has been going up, in hopes that it will keep going up, is not investing. It is not investing. It is not investing. It is subscribing to The Greater Fool Theory.
For those of you unfamiliar:
A theory that it is possible to make money by buying securities, whether overvalued or not, and later selling them at a profit because there will always be someone (a bigger fool) who is willing to pay the higher price.
If you want to speculate, and be a gambler, then so be it, but call yourself that. IF you don't do your research and make sure you are buying $1 of assets for less than $1, then you will take it up the ass when the inevitability of the next Real Estate Bust (which the last one was just in the early 90's folks) begins. You will be holding the bag. And you could lose all your money. I'd like to say I never knew anyone who went bankrupt buying stocks without using margin, but if you think using 90% leverage and buying real estate is SAFER unless you know what you're doing, you need a lesson in debt.
Do you know what putting 10% down and borrowing 90% really means? It means that if the value of the asset you purchases declines by as little as 10%, you have lost all your equity.
Let's go through an example:
10% down on a $200,000 property, $20,000 cash, $180,000 loan.
Real estate bust. Properties decline in value 30%.
$140,000 property, 0 cash, $180,000 loan. Foreclosure. Bankruptcy.
$20,000 cash, buy $20,000 in stocks.
Stocks crash, lose 50%
$20,000 is then worth $10,000, you aren't bankrupt.
Risk is all relative.
That being said, I love investing it's great.
