142 - What Are the Tradeoffs Between Real Estate and Stock Market Investing?
03/09/22 • 23 min
Scott and James discuss the tradeoffs between investing in real estate and the stock market.
Listener Question
My wife and I just purchased our first home (30-yr fixed, low interest rate, strong housing market in suburbs of a major city). As we start a family, we realize we'll likely need a larger home in 5-8 years. Should we plan to purchase a second, larger home, while maintaining our current home as a rental property (which I assume requires less risky investments today), OR invest more aggressively today and plan to sell our current home when we upgrade (have only one house, no rental). Hoping you can provide a framework to help think through potential returns/tradeoffs of each scenario. For example, how to compare the return on a rental property (appreciation of property value and eventual sale) vs returns if the same money was invested in the market. Also, imagine there is tradeoffs between liquidity of owning a rental vs investing in market.
Our home is worth between $650-700k, interest rate 2.6%. Unclear what rent we could expect, maybe around $3k/month.
Planning Points Discussed
- Retirement Planning
- Utilizing Time Efficiently
- Capital Appreciation
- Purchasing Power
- Other issues (IRAs, Inflation, Financial Goals, etc.)
Timestamps:
3:07 - Liquidity For a Purchase
6:27 - Multiple Mortgages
9:55 - Tax-Writeoffs
12:05 - Home Prices
16:17 - Comparing Stock Market v. Real Estate
18:22 - Net Worth
21:08 - Desire For Simplicity
LET'S CONNECT!
James
Scott
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Scott and James discuss the tradeoffs between investing in real estate and the stock market.
Listener Question
My wife and I just purchased our first home (30-yr fixed, low interest rate, strong housing market in suburbs of a major city). As we start a family, we realize we'll likely need a larger home in 5-8 years. Should we plan to purchase a second, larger home, while maintaining our current home as a rental property (which I assume requires less risky investments today), OR invest more aggressively today and plan to sell our current home when we upgrade (have only one house, no rental). Hoping you can provide a framework to help think through potential returns/tradeoffs of each scenario. For example, how to compare the return on a rental property (appreciation of property value and eventual sale) vs returns if the same money was invested in the market. Also, imagine there is tradeoffs between liquidity of owning a rental vs investing in market.
Our home is worth between $650-700k, interest rate 2.6%. Unclear what rent we could expect, maybe around $3k/month.
Planning Points Discussed
- Retirement Planning
- Utilizing Time Efficiently
- Capital Appreciation
- Purchasing Power
- Other issues (IRAs, Inflation, Financial Goals, etc.)
Timestamps:
3:07 - Liquidity For a Purchase
6:27 - Multiple Mortgages
9:55 - Tax-Writeoffs
12:05 - Home Prices
16:17 - Comparing Stock Market v. Real Estate
18:22 - Net Worth
21:08 - Desire For Simplicity
LET'S CONNECT!
James
Scott
ENJOY THE SHOW?
Don’t miss an episode, subscribe via iTunes, Stitcher, Spotify, or Google Play.
Leave us a review on iTunes.
Have a money question you want us to answer? Submit one here
Previous Episode
141 - How to Rebalance When Tax Implications Are Involved
Scott and James discuss how to rebalance when tax implications are involved.
Listener Question
I'm 30 years old and have close to 1/2 million in taxable brokerage accounts. While I was investing, I was not targeting a specific asset allocation, and now realize my portfolio is very heavily concentrated in domestic large cap stock funds. My question is, how do I go about rebalancing to achieve a more diversified portfolio while considering the implications of taxes and market cycles?
Planning Points Discussed
- Retirement Planning
- Utilizing Time Efficiently
- Capital Appreciation
- Purchasing Power
- Other issues (IRAs, Inflation, Financial Goals, etc.)
Timestamps:
3:07 - Tax Planning
6:05 - Volatility Concerns
8:11 - Creative Planning
10:57 - When To Sell
13:30 - Example of Tax Implications
15:48 - Taxable Accounts
17:22 - Gifting For Tax Planning
LET'S CONNECT!
James
Scott
ENJOY THE SHOW?
Don’t miss an episode, subscribe via iTunes, Stitcher, Spotify, or Google Play.
Leave us a review on iTunes.
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Next Episode
143 - How Much Do I Need to Retire?
Scott and James discuss how much you need to retire.
Listener Question
I'm 55 years old and currently employed with $1.1 million in 401k, $150,000.00 in annuity fund. Upon retiring I will also have a pension with medical, dental & optical coverage. My yearly income is $120,000 & I’m looking to retire at 60 years old. In your opinions does retiring comfortably in 5 years look reasonable?
Planning Points Discussed
- Retirement Planning
- Utilizing Time Efficiently
- Capital Appreciation
- Purchasing Power
- Other issues (IRAs, Inflation, Financial Goals, etc.)
Timestamps:
3:29 - Listener Info
6:06 - Living Expenses Today
8:37 - Retirement Expenses
11:20 - Social Security
13:30 - Financial Freedom
16:05 - Tax Planning Opportunities
18:17 - Withdrawal Rates
LET'S CONNECT!
James
Scott
ENJOY THE SHOW?
Don’t miss an episode, subscribe via iTunes, Stitcher, Spotify, or Google Play.
Leave us a review on iTunes.
Have a money question you want us to answer? Submit one here
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