Who here does some real estate investing?

[nimbus]

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But the scenario you’re illustrating is very rare. RE never goes to zero

Agreed. I was just replying to @dhb with his example.

 

[pgg]

But the scenario you’re illustrating is very rare. RE never goes to zero

Neither do mutual funds.

Of course, individual stock can go to zero, but you can sell and cut your losses with about 45 seconds of mouseclicking effort. Real estate, especially depreciating real estate, not so much. And unless you're buying on margin, you can never be underwater with stocks and unable to sell. Sometimes you can short-sale a property but then the bank's 1099 will just turn their problem into the IRS's problem, and the IRS always gets its money.

Depreciating real estate purchased on credit and depreciating equities purchased with cash are not the same thing.

Also, residents near Chernobyl might disagree about real estate never going to zero. Or anyone near a superfund site. Or a war zone. All obviously very unlikely in the USA ... but one of the intrinsic risks of RE is the relative lack of diversification, and the way real estate holdings typically constitute an enormous portion of a RE investor's portfolio. RE is tied to the fortunes of a single location, a single school district, a single collection of neighbors who might run a meth lab or put a couple Trans Ams up on blocks in the yard, a single town's economy.

If you want to accept all of these risks in exchange for what you think are higher real returns (despite evidence to the contrary, as noted by Mman), more power to you, but don't pretend those risks don't exist.

 

[btbam]

But the scenario you’re illustrating is very rare. RE never goes to zero

Exactly. The land itself can be quite valuable.

 

[acidbase1]

Stocks are much more volatile minus the subprime mortgage BS

 

[urge]

Exactly. The land itself can be quite valuable.

Depends on how big the tax bill is.

High taxes can make land worthless.

 

[Mman]

Stocks are much more volatile minus the subprime mortgage BS

volatility is why you get a higher return with stocks. If they weren't volatile, they'd have a lower return over time.

Volatility is a great thing if you are investing for the long term. When you get closer to retirement (or in retirement) it's also why you should be diversified into a far lower exposure to that volatility.

Stocks are more volatile and have higher returns than real estate. If people want lower volatility and lower returns they should probably stay away from stocks.

 

[Mman]

Depends on how big the tax bill is.

High taxes can make land worthless.

so can declining populations. You can buy a house in Italy for $1.

 

[acidbase1]

volatility is why you get a higher return with stocks. If they weren't volatile, they'd have a lower return over time.

Volatility is a great thing if you are investing for the long term. When you get closer to retirement (or in retirement) it's also why you should be diversified into a far lower exposure to that volatility.

Stocks are more volatile and have higher returns than real estate. If people want lower volatility and lower returns they should probably stay away from stocks.

The past few years returns haven’t been better than RE. Most are posting 6-8% returns

Should we have a large market correction, I’d pull a 180 and be pushing all my investing towards stocks

 

[Mman]

The past few years returns haven’t been better than RE. Most are posting 6-8% returns

Should we have a large market correction, I’d pull a 180 and be pushing all my investing towards stocks

The stock market has had massive returns the last 9 years while real estate returns are all over the place depending on the location you are referring to. I'd suggest not making drastic changes to any long term investment plan based on short term price changes. If you would make a big change with a large market correction, that probably means you are doing it wrong right now.