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Real Estate - The advantage of real estate over stocks

6 July 2006 2 Comments

Dr. Dolf de Roos from Trump University wrote a good article that talk about the advantage of real estate over stocks. For you information, below is the 4 benefits that Dr. Dolf mentioned :

  1. Leverage - You can use $100,000 to buy a 1 millions dollar of property.
  1. Borrowing power - as we know, bank never loan money to you to invest in stocks.
  1. Exponentially greater return on your investment - due to the leverage, just a 10% of increase in property value, your return will be 100%
  1. You control the value of what you own - You can do something to improve your property value but not your stocks.

Source : Trump University Blog

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2 Comments »

  • traineeinvestor said:

    I have to disagree. Dr de Roos is being overly simplistic, ignores several advantages that stocks have over property, in at least one respect is just wrong and at times is misleading. Example: it is wrong to say that banks will not lend against stocks. They do it all the time and call it margin financing. It would be better to say that borrowing to invest in property is less risky for a given level of gearing and can be done on more favourable terms.

    John T Reed has quite a bit to say about Dr de Roos here: http://www.johntreed.com/DeRoos.html However, some of the statements made by Mr Reed are not correct and merely reflect some differences between the New Zealand real estate market (which Dr de Roos writes about) and the US one (which Mr Reed is familiar with). Still it is an interesting perspective.

    Stocks and property are different asset classes. In some respects property has advatages over stocks and in others stocks have advatages over property. Comapring the two is useful as it forces people to think about the risks of investing. However, it is hard to conclude that one will always be better than the other. Personally, I like, and invest in, both.

    # 6 July 2006 at 9:10 am
  • harrison (author) said:

    Thanks for your information. Yes I agree that we should invest in different kinds of investment since every investment has its own special advantages.

    # 7 July 2006 at 9:09 pm

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