Just trying to get a few professional opinions here. Lets say you have $35k and a full time job. In terms of making extra income and best ROI. Would you rather Invest/trade the $35k and build up your portfolio? Or would you rather buy a Condo ~Value $150k, downpayment $35k , mortgage 115k , 30 year loan at 4% and rent it out for $1,200 - $1400 a month?
Sorry, but your inquiry sounds like a setup to introduce your new "Get Rich Quick in Real Estate" DVDs. Seems like there are a lot of vultures out there right now trying to convince people to invest in real estate, likely the ones that are already invested. Or, are you seriously considering it yourself? If so, how much are the real estate taxes and insurance? How much are you budgeting for maintenance? How old is the roof? How old is the heating and cooling system? Do you know the differences between soldered-joint plumbing, PEX connections, and water-cooled tail-light bearings?
I am seriously considering this for myself. for the Stock/Trading investment side Potentially this could be 2-3% a month in either direction ($500 loss) / $500 profit , of course if trading Options...could be greater gains/losses. ~$1000 loss / $1000 profit a month. for the condo side After taxes/Insurance/Condo Fees/maintenance potential net profit a month is $300 a month, but also build equity in the house/ potentially house prices could also go down, or unable to rent out condo for 1-2 months. Well its going to be condo in a complex, so there wont need to do repair for roof if its 1st /2nd floor, and major leaking/repairs should be handled by the Condo Association...i imagine.
If you are new to trading, expect to lose all of the $35,000 or if you are hardworking, smart, and prudent then at best, expect to only break-even for the first 5 years. Then the next 5 years you may be able wrestle out a 10% ROI. After that, 20% or more ROI is possible but you have to love it and allow it to consume most of your free time. So, with the condo you could cash-flow $3,600/year on a $35k investment or 10.3% ROI and probably pay zero income tax. But then you have the head-aches with other people's problems and their inability to pay you. You have to be tough, and willing to forego compassion, quickly taking the necessary legal steps to get them evicted.
I have a coworker that rents out 55 properties (single family homes). It seems like a headache from how much he complains about it and how he has to work after leaving his first job. He makes decent money from what I can tell, but always seems stressed about it and unable to get good rest. Obviously though, that's 55 properties. Not the same as owning just one. In my opinion, while I respect @Onepoint272's view and how he analyzes the market and does a ton of research, I think 10% is achievable, and if you are willing to admit not every trade will be a win and close it at a loss, you WILL NOT lose all $35K if you're not gambling. Do your research on stocks, WAIT for good entries, and take profits when it gets to your target price or if something changes and you have to sell early and you should be fine. You will have losing trades, you will have losing months, you will have losing years in the long run, but there are lots of people who can make more than $300/month (the amount you said you would expect to making renting) with a $35K portfolio if they pay attention and stick to the trade plan they set up before entering a trade.
Yeah, I was exaggerating about losing the $35k, that might not happen unless you're an emotional mess; the type who throws his 9 iron when he chips one into the pond. The truth is though, you must have a temperament that doesn't get frazzled when you lose. You can't be afraid to take a loss quickly when it reaches your stop. Always know how much you can lose on any trade (entry price minus stop loss price) and then calculate how many shares you can buy to limit the loss to 1% of your portfolio. If you do that, you can lose 124 trades in a row and still have $10,000 to work with. If after losing 124 trades in a row you don't win on number 125.....then you should probably conclude that trading is not for you. The point is, taking losses is part of the business; full or part time. You can only control your risk. You cannot control the market. Example Calculation: Portfolio Value = $35,000 Max Loss on any one trade = $350 Entry Price = $50 Stop Loss Price = $45 Risk = $5 Number of Shares you can buy = $350/$5 = 70 Obviously the key is knowing where your stop should be placed...that's another topic. Also a simple yet important concept to keep in mind: Loss .....Gain Req'd on next trade to break even 7% .............. 7.53% 8% .............. 8.70% 9% .............. 9.89% 10%.............. 11.1% 11%.............. 12.4% 12%.............. 13.6% 13%.............. 14.9% 14%.............. 16.3% 15%.............. 17.6% 20%.............. 25.0% 25%.............. 33.3% 30%.............. 42.8% 40%.............. 66.7% 50%.............. 100%........Take a 50% loss and you'll need to double your money to get back to even. So, getting your entry as near your stop as possible......patience...... is important. This is also the classic example of why NOT to buy and hold. If the stock goes down 50% it will need to double for you to get back to even......Fat Chance......if it does it could take years and your money is all tied up.
