Although I do believe Real Estate is the best asset class to build generation wealth, there are a few flaws I share in this video…
At the end of the day I think everyone should be diversified and there are some pros when it comes to the stock market that you can’t quite get potentially and or you may have a little bit more risk when it comes to the real estate side of things so the con of real estate versus the stock market number one more work at the end of the day dealing with agents and title companies and paperwork and management and contractors right.
Yes you can go buy a property that is turnkey ready to go but at the end of the day it’s not going to be as profitable I’m not saying that that’s necessarily a bad decision but what I’m trying to do is buy distressed properties go in there with my contracting team appreciate and renovate the property and make it worth way more than what we bought it for refinance out of a deal tax-free pay out my investors and keep any additional profit at in the day.
It requires work right it’s not just like sitting at home picking your belly button lint and just clicking a button and buying some amazon stock it requires work now does it require work to buy stocks doing research and doing your due diligence of course but hypothetically it does require more work when you are buying real estate.
The second con is it can be very expensive and ill-liquid again every asset class is booming right now as I record this video and specifically real estate in markets like Columbus Ohio home prices are just going up every single day every single month and there’s really honestly no sign of slowing down so when you go to budget a property that you’re gonna do fifty thousand dollars a renovation the cost of lumber and time alone could cost you an extra five six seven ten thousand dollars and if you don’t know what you’re doing you can lose a lot of money right.
That project can turn from 50 to 70 000 really quick and you can be in over your head and secondly is the ill liquid asset one thing I do like about the stock market is again you can click a button sell your stock and shares and have that money in your bank account in you know 48 to 72 hours versus a real estate project you have to list it on the mls or contact the wholesaler or do a for sale by owner you have to go through a process right.
You may have to go through a refinance process to get your money back to pay out your investors or to get your money back to make sure you don’t go bankrupt typically that takes about 30 to 60 days depending on the situation and time could be of the essence versus again the stock market you click a button or you call your financial advisor and you say hey sell off I need my money back and and you’re good to go the third con is transactional cost again like I said if you’re going to sell a property or refinance a property.
You may have the cost of closing costs with the title company with the mortgage lender real estate fees such as the realtors commission appraisal cost all these miscellaneous costs can really add up borrowing debt from a private money lender or borrowing debt from a hard money lender all these transactional costs can add up and you may not be calculating it correctly.
So you think you’re making 50,000 on a deal but after all these expenses you actually may only be making 35,000 a deal so it can be very very expensive if you’re not doing your numbers correctly when you are acquiring real estate deals versus the stock market yeah you can have an abundance amount of fees with a 401k and financial advisors et cetera but if you’re self-managing your portfolio usually you can have you know fees as low as less than one percent.
Again every situation is different every account is different but again the third con is the transactional cost there’s all these different costs behind the scenes for both stocks in real estate but real estate in particular that people are just not aware of and or they don’t take into consideration when they’re dispositioning the deal when it comes to refinancing or selling the property you.