Comments on: Tenants over Dividends

By: Mr. Cheap

Mr. Cheap — Thu, 01 Oct 2009 01:11:10 +0000

hazzard: I’d say that capital gains have already been priced into the markets. There’s no free lunch, if one approach was undeniably better than the other, everyone would invest in the superior market. Markets naturally balance to prevent this from happening.

I wouldn’t even make a guess at what either market is going to do. Real estate seldom doubles or triples in value (over the short term), but then it seldom drops to worthless either (such as Nortel or Washington Mutual).

I *would* say that Calgary real estate has been on a run in recent years, which makes it less likely to out-perform from a “reversion to mean” perspective. Someone smarter than I would have said the same thing about stocks in 2007 (and whether the correction is over or not is anyone’s guess).

One of the benefits of a diversified passive portfolio with a set asset allocation and periodic rebalancing is that you don’t have to predict the future…

By: hazzard

hazzard — Wed, 30 Sep 2009 23:20:20 +0000

Thanks. Do you take capital gains into account in this discussion? I’m thinking real estate gains going forward have to be considerably less than dividend stock potential. Particularly in a market like Calgary. I can’t see real estate doubling or tripling again here but equities could still conceivably do that. Would you concur?

By: Mr. Cheap

Mr. Cheap — Wed, 30 Sep 2009 23:00:48 +0000

Hazzard: I still pretty much on the same page as when I wrote this. I’ll post a comment on Moneygardener’s blog and see if his opinion has changed…

By: hazzard

hazzard — Wed, 30 Sep 2009 22:36:02 +0000

I’d be very interested to revisit this post today and see if anyone’s thoughts have changed considering the troubles both the stock market and real estate market have seen over the past year.

By: Moments of Fame « Funny about Money

Moments of Fame « Funny about Money — Mon, 10 Nov 2008 17:54:11 +0000

[...] In the investing department, Four Pillars has an entertaining and interesting article reflecting on the advantages of real estate over dividend investments. This carnival has more excellent and informative articles than you can [...]

By: The Struwwelpeter Edition of the Carnival of Personal Finance

The Struwwelpeter Edition of the Carnival of Personal Finance — Mon, 10 Nov 2008 05:57:07 +0000

[...] Four Pillars: This post presents an interesting debate between real estate and dividend stocks. Mr. Cheap makes the case that investing in real estate is superior to investing in dividend stocks. [...]

By: telly

telly — Mon, 03 Nov 2008 19:13:09 +0000

Like Cheap, my husband and I invest in both real estate (rental properties) and dividend stocks. Not surprisingly, both have had their days in the sun (and those days are not today!). The 1st 3-4 years of rental property ownership for us was a serious hayday, and no dividend stock or income fund could have rivaled it.

The 1st property was purchased with only $7,000 down (+ ~$2k fees). The 2nd property was purchased with only $12k + ~$2k in fees. Each property produced a *net cash flow* of $1k / mth ($24k / yr).

$24,000 / $23,000 = 104% / yr “RENT”

If we had purchased BMO shares (assuming today’s price ~$43) with that $23,000, we would have received ~$1500 in dividends the 1st year.

$1500 / $23,000 = 6.5% “DIVIDEND”

While there is a bigger PITA factor in owning rental property, it some cases, it can be made up in the way of profits. Just like buying stocks, you must do your due diligence before purchasing. Both real estate & financial markets are always changing too so again with both, your work does not stop after purchase.

By: squawkfox » Rehab, Girl Crush, and Links Oh My!

squawkfox » Rehab, Girl Crush, and Links Oh My! — Mon, 03 Nov 2008 00:07:39 +0000

[...] Tenants over Dividends | Quest For Four Pillars [...]

By: Dividend Growth Investor

Dividend Growth Investor — Sat, 01 Nov 2008 20:23:39 +0000

I prefer dividends over rentals. Of course when it comes to purchasing your own home I would always prefer that as it gives you more stability and a roof under your head.

Your entire real estate could dissapear even if it is insured – just ask people from New Orleans about their 2005 experience with Hurricanes.

By: Shank

Shank — Fri, 31 Oct 2008 22:31:51 +0000

Here’s a link to some research performed on this very topic (real estate vs. REITs)…the answer may surprise you….and make you think twice.

http://strikershank.blogspot.com/2007/07/alternative-investments.html