Property portfolio VS ETF

[OngHuatHuat]

Mind sharing how many USA properties you own now? May I know what causes sub prime crisis?

U don't understand....u can fund those cheap properties in USA for nearly nothing,and u can rent each room to a college student assuming it's in a college state arizona or something, college students are the best renters,they need a place to stay for the year and u can get their parents to co-sign,which means if they are late with the rent just give their parents a call and they will be begging and groveling.assuming 3 rooms x $500 each,ur making a nice $1500.assuming the house is worth 100k to 150k and deposit is 20 percent,ur making literally $18k return on a 20 to 30k investment,thats a roi of nearly 60% to 90%!!!!and when the house is paid off in 5 to 6 years,u can use it to leverage and buy even more houses!!!iv read blogs where these americans accumulate 15 properties in less than 4 years!!!all these american investors they own hundreds of properties in their states and theres no one to disturb or compete with them.

america is a huge place,3rd largest country in the world,350 million people,50 states,theres no need to invest in new york or san franc,investing for appreciation is a fools game,real estate u either flip or u invest for rental income.

in america theres a hundred ways to finance properties,sometimes u dont even have to put a single cent down,now that is what i call investing!!!!

 

[BBCWatcher]

I should ask this way , is index investing better than property investing in the last 10 to 20 years ?

I assume you mean "index of stocks." VNQ is a real estate index-based Exchange Traded Fund, and it's not the only one. Real estate index funds have existed for a long time.

Whenever you ask that question it's like asking whether it's better to buy clothing or shirts, food or pizza.

OK, if you mean stock indices and total after tax returns, yes, they've performed better than real estate (with reasonable assumptions, for example not investing in a gold stock index fund, a Syrian stock index fund, or a high cost index fund).

However, there are two broad exceptions to that blanket statement. First, real estate in Singapore had a great run from the 1970s through 1997. A lot of older investors remember that period fondly, as they should. If you can ride a "special event" in any market, you can have a great ride. Second, government subsidies (notably HDB) can skew the comparison. If the government is effectively handing you free money, it's typically a good idea to accept it.

 

[BBCWatcher]

As a follow up, it's easy to find the 10 year numbers in the U.S. markets. Through May 31, 2017, the 10 year average annualized returns are 6.93% for Vanguard's U.S. S&P 500 stock index fund (VFIAX) and 4.94% for Vanguard's Real Estate Investment Trust (REIT) index fund (VGSLX). That's almost exactly a 2 percentage point gap in the world's largest economy over that particular 10 year period (June 1, 2007, through May 31, 2017). I believe those are pre-tax yields, but adjusting for tax wouldn't change the ranking since the U.S. tax treatment is similar (or even identical) for those two funds.

If you extend VGSLX back to its inception (November 12, 2001) then you get a 10.83% average annual return. Big difference! VFIAX would then probably look worse relative to VGSLX (don't have the exact number, though -- "since inception" varies for these funds). Why might that be? Well, one possible reason is the 9/11 terrorist attacks in New York. Suddenly real estate, particularly in Manhattan, lost a lot of its attraction back then. So if you start a U.S. real estate fund on November 12, 2001 (two months after the attack), then that can work! Pick a short enough time period, the right market, and buy at the right time, and you can do better than usual. Or, as in the Singapore example, the 1970s was a great time to invest in real estate. It was on the cusp of Singapore's explosive growth, and that worked for those who rode that wave.

Anyway, I don't do either-or. It's not "versus" for me. I don't have an accurate crystal ball.

Also, if you want to look at past results, the ideal way is to simulate after-tax total returns from a dollar cost averaging program. That's a slightly complicated calculation since you have to look up historical prices and such -- 240 historical prices if you're running a 20 year simulation. Anyway, "who cares," I buy (dollar cost average) and hold these two asset categories, plus several others.

The more interesting question is what your percentage allocations ought to be going forward. I have no problem if somebody wants to invest in their own home (owner-occupied housing) and live in it for at least a few years. That often makes a great deal of sense, and HDB can make it even more sensible. That home is part of your total portfolio, and you should count it. My "rules of thumb" are that I would get nervous adding to real estate positions if I already have 20% of my portfolio in real estate (counting my own home). I also get nervous adding to an individual stock position if I already have 5% of my portfolio in that particular stock. (Example: your employer's stock, purchased at a discount or awarded via stock options, if applicable. Another example: a shiny metal called gold that some people dangle from body parts.) And I would get quite nervous with over 40% in Singapore (a small, Denmark-sized country). These are my "rule of thumb" percentages to promote at least reasonable diversification. You might have different percentages in mind, but they probably shouldn't be either 0% or 100%. So pick some "rules of thumb" that make sense for you, in your situation.

 

[Wood41]

For properties, don't count the profit when they are not sold yet.
Buyers are few in between.

Why do many people think investing locally in properties, dividend-yielding REITs or etf are almost like a sin to yourselves ?

 

[BBCWatcher]

Why do many people think investing locally in properties, dividend-yielding REITs or etf are almost like a sin to yourselves ?

Who said that? Nobody in this thread.

....But it is an investing "sin" to put all your eggs in one basket. That's called gambling. Some people sin.

 

[PostCountWarrior[+1]]

sg property, if u own more than one, u pay absd, u immediately out of the money by 7%, will u enounter that when u buy etf?

foreign property can consider, but u wanna buy what the locals are buying. if its actually good, most likely the locals have snapped them up. if the locals havent buy, u need to ask urself u know more than the local?

 

[w1rbelw1nd]

Answering TS question directly, nope I dont believe that anyone can give a definitive answer to your question. There will be people with that confidence that they can "property pick" a prime ppty that is undervalued, with good rental yield with a very good chance of giving a very good return.

As with stock picking, I dont see a point trying to share why I think they may be too optimistic with their assumptions. Maybe I am just too stupid or too lazy to learn about property investment


Anyway, I think these are the key points why I have a preference on ETFs over property

1. Smaller denomination over larger denomination, which allows me to invest more consistently

2. Ease of liquidation. Cash back in T+3 days.

3. Minimal effort. Deciding on an asset allocation, sticking to it versus actively trying to time the property market, meeting agents, having to deal with tenants, all the government application, income tax, calculating ur IRR returns...

 

[SpeedingBullet]

Real estate soared in Singapore from the 1970s through about 1997. That roughly quarter century was terrific for those investors.

This.

I can't stress this enough - A large multitude of "rich" Singaporeans generated their wealth not by being smart, but by simply buying a house to live in decades ago and saw its value quintupling or more. These same folks are probably also the ones being burnt by stupid investments in gold scams and O&G bonds. Makes you wonder why they get to be "accredited investors".

That real estate bull market from the 70s till today will not repeat, at least not in the same, rip-roaring fashion.

In short, past performance isn't indicative of future results.

 

[mummy1234]

The PWP of 6.9 mil is to bait more Sinkies into believing that the property boom will continue....

 

[Wood41]

How do you know ?

That real estate bull market from the 70s till today will not repeat, at least not in the same, rip-roaring fashion.

In short, past performance isn't indicative of future results.

 

[SpeedingBullet]

How do you know ?

Let's save my comments and revisit this post 10 years from now?

#timestamp

 

[Wood41]

LOL
Many 'analysts & experts' couldn't say anything right 6 months down the road.

Let's save my comments and revisit this post 10 years from now?

#timestamp

 

[frenchbriefs]

Mind sharing how many USA properties you own now? May I know what causes sub prime crisis?

I don't own any US properties,to be honest I'm just another loser in Singapore.i got all my knowledge from watching YouTube American real estate channels and reading blogs.but if I ever get to US one day I'll give it a shot and let u know.

Banks caused the sub prime I guess with their MBS and cdos,but don't worry, people have been investing in real estate since the beginning,I know one guy on YouTube whose been investing in US real estate since the 1973 stock market crash.one thing I do know is real estate always recovers at least in us,real estate works in cycles,there's already a 2nd housing bubble going on right now with prices reaching 2007 highs thanks to all the liquidity and q.e.

 

[alocacoc]

So property portfolio does work in US,HK,London and major city but doesnt look well in SG.
Maybe 10 years later, we shall all look back here.

 

[BBCWatcher]

....one thing I do know is real estate always recovers....

That's simply not true. Plenty of highly valued properties have sunk and stayed sunk. Consider the third largest national economy in the world: Japan. Japanese national real estate valuations are lower than they were at their circa 1992 peak. That's a quarter century without a recovery, and counting.

To pick another "fun" example, real estate in Babylon -- the largest city in the world at a couple points in history -- has never recovered its value. The remains of that city are located 85 kilometers south of Baghdad, Iraq. Maybe now is finally a great time to buy, but we're at over 2,000 years of lower real estate values, and counting.

As another example, there was another thread in this forum describing a group of investors that piled into North Dakota real estate. North Dakota has/had an oil and gas boom due to new technology and high oil and gas prices. Housing prices soared during the boom. Then they collapsed when the boom went bust. It's extremely likely they will stay collapsed, forever (or near enough). If you go visit North Dakota you'll figure it out.

Here are a few more examples of places where property values haven't recovered for centuries or even millennia: Tenochtitlan (in present day Mexico), Damascus (the oldest continuously inhabited city in the world), and Athens.

 

[frenchbriefs]

That's simply not true. Plenty of highly valued properties have sunk and stayed sunk. Consider the third largest national economy in the world: Japan. Japanese national real estate valuations are lower than they were at their circa 1992 peak. That's a quarter century without a recovery, and counting.

To pick another "fun" example, real estate in Babylon -- the largest city in the world at a couple points in history -- has never recovered its value. The remains of that city are located 85 kilometers south of Baghdad, Iraq. Maybe now is finally a great time to buy, but we're at over 2,000 years of lower real estate values, and counting.

yes i know someones gonna bring up japan....but their economy has not gone anywhere for the past 3 decades either,while the US stock market has been on the steady march to the skies with occasional

 

[SpeedingBullet]

LOL
Many 'analysts & experts' couldn't say anything right 6 months down the road.

Yup. Yet they're paid boatloads to say the wrong thing

Don't worry I timestamped myself. Let's check back in in 2027 . Hell let's make this more fun: 10 & 20 yrs. 2037 also check in. I willing to stand by my words.

 

[Mecisteus]

To be on the safe side, consider investing in properties only when there are huge discounts. Actually, it also applies to all kinds of assets.

At the moment, neither stocks nor properties are at huge discounts. So your exposure to them should be lower than mid-high levels.

 

[BBCWatcher]

At the moment, neither stocks nor properties are at huge discounts.

Which ones?

Stock markets in places like Russia, Brazil, and Greece have relatively low valuations right now. Greece looks pretty good for real estate. Canada's currency has been particularly weak, so that might be helpful (although global real estate investors seem to have figured that out already -- Vancouver is pretty insane).

Anyway, my point is the world is a big place. If you want to be selective, you can be.

 

[Wood41]

Nikkei is in recent high.
I think Tokyo property price is very high.

Know when to buy & sell.

yes i know someones gonna bring up japan....but their economy has not gone anywhere for the past 3 decades either,while the US stock market has been on the steady march to the skies with occasional