Returns on Real Estate vs. Stock Market

There is always going to be debate amount investors over the returns on Real Estate vs. the Stock Market. Each side has their valid points and it is mostly going to be up to the investor to make his own decision.

Real Estate has a long history of being a stable and secure investment. The Stock Market, by comparison is a relatively new creation. The value of land and property dates back to the very beginning of recorded history, but does this ancient historical value really have much to do with today’s investment market. The supporters of the Stock Market will be quick to point out that they recognize Real Estate’s historical value, but will be quick to point out that “that was then, and this is now.”

When you take a look at the average return on investment (ROI) figures for the modern era from 1926 to 1996, you find that it is pretty close to being a tie. Small stocks slightly outperformed Real Estate during this period, 12% to 11%, although Real Estate edged out the Dow Jones Industrial Average by 11% to 10%. These figures indicate that there is not much difference between Stock Investments and Real Estate Investments according to historical return figures.

There are several major differences between the management of both investments. Stocks are easily transferred. They can be bought in smaller lots or large lots. There is much similarity between Stocks of different types. Real Estate investments take a bit of time and effort to complete the transactions. The transactions costs tend to be high. The idea of an inexpensive piece of Real Estate does not mean anything at all the same as an inexpensive share of Stock. All of these factors seem to point to Stocks as being better.

But administrative details and transaction costs do not have anything to do with the rate of return. In fact, if initial costs on Real Estate transactions are higher, and historically they end up performing as well, it is obvious that once they are in your portfolio, they are going to outperform most Stocks. Also, the trick to successful investing is not graphing what happened in the past, but predicting what is going to happen in the future.

One of the most compelling arguments for Real Estate investment is the matter of finite space. There is only so much land and only so much improvement can be made to it. Corporations and other types of business entities have no such finite limit. The expansion of the Stock Market into the electronic world that led to the “” bust recently is an example. Since Real Estate has limits on its ability to expand, it would seem likely that it will continue to increase in value as it grows more and more scarce. Real Estate managed to hold its own against the Stock Market during the period of the Stock Market’s great advancement and growth. The future could very well belong again to the Real Estate investor as it once did in the past.

– What You Should Know About Home Mortgages

As the nation’s real estate market continues to grow and new technology gains more ground, many widely accepted beliefs that were true just a few years ago may not be true today. Before you go after a home mortgage or home loan or any , if you have a lot of bad credit because of consumer debt such as credit card or personal loans, try to eliminate or reduce this debt as soon as possible because it’ll affect your ability to qualify for a home mortgage and the estimated monthly payment.

Some tips to know: whether you’re financing or refinancing. most people move or refinance within a seven year period. And loan programs for down payments of 20% or less require you to purchase Private Mortgage Insurance (PMI).

If you’re going to buy a second home or second property, you’ll need to identify the source or sources of your down payment, since you won’t be selling your current house and using the proceeds, and you’ll need to expect a larger monthly payment for housing and other related expenses too.

If you have a problem getting a home mortgage and the seller still owes money on the home you can check with your lender and see if you can get a wraparound mortgage. Although it’s not legal in all states, it will allow you to pay the monthly payment on the existing mortgage and an additional payment to pay the difference; make sure that a wraparound mortgage will not trigger a due-on-sale clause ask the lender in advance.

Many people are not aware that they may be able to customize the length of their loans. Ask the mortgage broker or lender you’re working with. Although lenders usually advertise 15-year loans and 30-year fixed rate mortgages, applicants can ask for 20 years, 25 years or any other number of years that would work better. This may allow borrowers to build up their equity faster and keep their monthly payments in a range they can afford. Some lenders may impose strict limits on how much of the down payment can come from borrowing from other sources.

Some of the advantages of adjustable rate mortgages that are touted include: lower costs – because they are usually priced lower than fixed-rate mortgages so you can increase your buying power and lower your initial monthly payments then if the interest rates go down, you’ll have lower payments. However in all the years I was in the real estate business I never advised anyone to get this type of loan. With the changing market trends one can find themselves in a heap of trouble just like that. This would be a last resort loan and one would have to be sure they were not going to be unemployed in the next few years.

If you’re working with a local builder within a sub-division or housing development and you’re just making carpeting, lighting and appliance selections for a brand new home, you’ll likely be able to get a standard mortgage loan. But if you’re planning to hire the contractors, electricians, plumbers, and painters, you’ll probably need a construction loan, which provides the funds to pay the subcontractors as the work goes along.

You will want to work with your mortgage broker or lender closely to develop an individual home loan or home mortgage program based on your credit worthiness. If you have or think you have a less-than-perfect or ‘bad credit’ credit report don’t worry too much about it. When financing real estate it’s important to know that a low FICO credit score doesn’t mean you won’t qualify for a home loan or home mortgage. There is much ado about the FICO score these days but there are many instances in which it isn’t going to interfere with getting a home loan or mortgage. If you do borrow money for a down payment it must be disclosed to the lender or if any of the money for your down payment was a gift, be ready to provide proof of it.

The 20-year fixed-rate mortgages allow you to make a consistent higher monthly payment throughout all of the 20 years you have the mortgage; the shorter term means you pay the loan off quicker and therefore pay less interest and importantly, build equity faster than you would with a 30 year loan. You’ll also need to take into consideration what the closing costs will be. Ask about the escrow account for taxes and insurance.

Make sure to ask other homeowners how they’re doing and what and home mortgage or loan pitfalls to avoid. And whatever you do don’t get yourself into a situation where you are unable to make the mortgage payments; make sure to think far ahead. Try not to get too overwhelmed with all the different home loan and mortgage choices available.

Make a list of questions and get the answers from any real estate agents, real estate brokers, mortgage lenders and any other real estate professionals you know or meet. Ask them about , home mortgages, home loans, refinancing and current mortgage rates. Go online and get home mortgage quotes. Online quotes can often be cheaper because of the elimination of middlemen for example. And compare the quotes with other quotes you get locally to find the best rates for you.

The Real Reason You Are In The Commercial Real Estate Business (And it’s not what you think)

One of the first articles on a website should arguably be some of the best. The main reason of course is because you want to make sure that you do not bore the reader right off – not good for a website review or getting all the articles read. So, the first articles should contain some revelations in it, some possible life-alerting message, a profound paradigm shift. Of course I’m being a bit sarcastic but I am also making a point.

I am going to share with you the most profound discovery I have had that has my business to where I wanted it to be in the shortest period of time possible. This advice will yield huge returns for those commercial investors that really use it and implement it. Here is the thing too. It doesn’t matter where your market is, what kind of market you work with, what kind of property you may specialize in or who your tenants are. Whether you work mainly corporate commercial real estate or apartments – Doesn’t matter. Here it is:


Stop right now and really think about what you have just read. As a matter of fact please read it again so you can really understand what I am telling you here.

Why is this the case? Why am I telling you that you are not in the commercial real estate investment business?

Here is why: you may be the best negotiator, the best financial analyst of commercial real estate, the best manager, have the greatest sales personality BUT – If you cannot get qualified tenant prospects in your door, prospects to call you and want to do business with you in the first place, NONE OF THIS DOES YOU ANY GOOD!!

So you see – the goal is to get business through the door in the first place because without a constant stream of business calling you, wanting to do business with you — your commercial real estate investment business will fail.

So, from this day forward your mindset needs to change to one of a marketer of your services vs. a doer of your services.

Don’t worry, I can hear your skepticism already.

Yes – you do complete real estate transactions, call tenant prospects, advertise your properties for lease through whatever media, etc. I know that you do this. Don’t get caught up in that part of it though. I know all of those things are important for your business.

But, Do Not skip over this.

Do not get confused that opening your mail and typing letters on your computer vs. developing systems that bring tenants in the door are of the same degree of importance for your business. They are not. Those that get this confused are losing money. A lot of money.

Once you adopt this “marketing your services attitude” you will notice all kinds of things happening including more investment dollars and more market share coming your way. More opportunities, more free time.

Sounds strange doesn’t it? Believe me, it’s not.

So, in summary, your goal is to work on getting as many qualified customers and tenants to come through your door, to call you, and want to do business with you in the first place. This is where we start, but how do we get the phone to consistently ring with qualified customers and tenants? We’ll talk about that in my next article…