The Tom Dupree Show
The Tom Dupree Show (Season 13 Episode 26) HOUR 2– 4-09-22
An interesting distinction is a difference between homes versus properties.
This isn’t to knock rental properties by any stretch of the imagination. They can be a good long-term investment, but they have different properties than that of a stock. A stock is portable. You’re not locked into one location. If it’s a high-volume stock…liquidity is key. And when you’re investing in a stock, it’s a passive investment. So you don’t have the sweat equity you might have with real estate. Now, we tell people if they’re good at managing property if they’ve done it and they know what they’re doing… They should get a better return from their rental properties than you would by owning a portfolio stock… if they employ leverage and do it wisely. That’s going to be the key thing.
You’re going to have to borrow some money. So you pay $100 million for the property, you might borrow 750,000. The $250,000 is actually your invested money. What kind of return can you get on it? You’re gonna get the rental income. Hopefully, the rental income will pay down the mortgage. You’ll begin to increase your equity that way. Then you’re going to get whatever appreciation. That can be a very nice return. But you’re going to have to use leverage, which is a little scary. You’ve borrowed money against this thing. It’s got to be paid back. These real estate guys when they get one property paid off, they go mortgage it and go buy another one they’re always rolling their debt over into another thing.
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