Why Shares are Better Than Property

Are you suggesting that Telsa has a liquidity problem? Maybe do some research into their financials.

Maybe if you are running a corner store. Try telling the billionaires and multi-millionaires that their millions and billions of dollars made off Telsa gains aren't real. Real money begets real money (rather than play money) my friend. Whether you like it or think it is fair is irrelevant. People where saying the same about Apple 15 years ago.

 

first year turn "profit" & + cash flow, you smash them all in share buy back ? do you know how this works ?

what tesla is apple now suddenly not sure what they going to do with their cash in bank ?

if we going by your maths, 2billion in a 600b market cap company, this is nothing. also they generate 500m a quarter end of 2020, this is one just one year worth of + cash flow,

with 2021(low car sales) delivery issue, and their recall in USA & CHINA.

are you going to say they have lots of cash in the bank ?

same industry ford have 37b in cash. (about 10% of their market cap)

if you wanna argue tesla is a tech company not a car manufacturing company, facebook have 60b in cash, they are 800m market cap.

then there is a debt ratio.

tesla have 14b debt. very small ratio vs market cap. but vs cash flow. suddenly its not all rosie.



part 2.

i think you miss the point, the billionaire and millionaires making money of tesla share got absolutely nothing to do with tesla, they are trading tesla shares not tesla (brand new ) cars.



do you even know how the stock market works ?

can i ask you a question, if you sell 1 tesla share tomorrow for $700, how much do you will get in your bank account,

if you think market cap = profitability.

how much do you think apple market cap should be based on the valuation of tesla.
apple pe is 33.
tesla is 1000.



ford have 333b debt, just to tell you that its really nothing to have cash, with out looking at other factors.
i thought its more impactful to made the point at the bottom..

 

I think you should calm down mate. Breathe. Release the stress.

I was not confusing profitability with stock market returns and I would suggest it a tad disingenuous to suggest so. Nontheless, it takes all kinds. Maybe re-read my post and chill out.

I have close relationships with senior execs and engineers at both Ford and Tesla and have a reasonable understanding of their machinations (see what I did there). Telsa may not have hundreds of billions in cash flow now and they certainly face some challenges but the point that Tesla spending $1.5b on Bitcoin when they were sitting on $8b cash was a desperate gamble of a company without prospects for profitability is a bit of a stretch. Play a long game mate. I'm sure Elon is. Anyway, have a good one.

The execs I know at Ford who are paid stock bonuses would gladly swap with the Telsa execs for their stock bonuses. Wouldn't you? Tesla has a brighter future ahead than Ford does, I'd wager. Then the P/E ratio will drop just like it did with Microsoft, Apple, and Facebook. I think that is a reasonable position.

 

share has crashed 30% since he made that play,
but still much better than ford employees,

 

They sure are interesting times

 

I put everything into a spreadsheet over 30 years and have given my findings some thought as to whether shares are better than property. It seems to depend on a few important factors which ALL need to be considered together. This is why one shoe doesn't (can't) fit all.


Sorry for the waffle, but I couldn't find an easy way to make these points. Please feel free to contribute anything I may have missed or wrong about. Thanks

Nothing here is financial advice etc. I'm just fumbling around in the dark!



1. The reduced relative impact of leverage as time progresses.

In the initial years of an investment property purchase with minimal deposit, the ROI appears to be more important than in later years IF in those later years a better return on equity can be had by moving the equity into shares.

2. Depreciation.

In early years of a property investment, depreciation is more important not just because of the greater 'nominal' amount but also the great 'real' amount. I think the schedules are a little deceptive in this regards.

3. Tax.

Capital gains (as if the property is being sold) needs to be considered at one's marginal tax rate and then 'baked' into the current return. With shares, there tends to be a faster turnover so the CGT is more likely to be considered in advance.

4. Superannuation.


From July, people can make a $27500 concessional contribution to their super. If one's employer is already providing this, then this adds weight to having money in property as an investment. However, if employer contribution is relatively minimal compared to the cap ( eg $5k pa), AND one doesn't have excess savings to make a concessional contribution, then it might be worthwhile considering releasing equity from an investment property (eg through selling it) and taking the tax break.....IF....

5. Expected capital returns

(following on from point 4)
....one can expect a greater percentage return from the share market than property. Historically the overall share market has returned 2-3% more than the overall property market. Yes they are property markets within property markets. But there are also outperforming shares. To compare apples with apples were should leave stockpicking or property picking out of the equation.

5. Age/Superannuation Transfer balance cap/current superannuation balance

A 20 year old will probably reach their superannuation transfer balance cap ($1.7m and rising) before 60 possibly without making any concessional contributions to be used to invest in shares. They would be free to leverage up on property from an early age.

A 50 year old with a low superannuation balance but equity in an investment property might be better served in selling that property and dollar cost averaging it into their superannuation, IF their employer is putting in a minimal amount ie as per person in point 4 with a $5k contribution from their employer.

6. PPOR

Leading on from point 5, if a person has a loan on their PPOR, it might be better (after considering all of the above points) to sell and IP and put the money into an offset - reducing the loan payments and using the savings on loan payments for point 5.

 

No matter which way people try to spin it, residential R/E is far more onerous than buying into LIC's or ETF's.
I have both IP's and managed funds, and in hindsight I wish that I would have gone down the share path much earlier than I did.
I have 3 IP's all under management and there hasn't been a period longer than 3 months where some problem (supposedly) has arisen. Certainly not what you want in retirement!
Anyone that tells you that living off rent is a form of passive investment is telling FIBS!
I don't hear from my share fund managers; I just see dividends go into my account....passive.

 

It will only be worse when getting on with age, I am in the process of buying my last car before handing back the license, picture if I have to drive an hour to fix a broken towel rail in a rental when I am 80, if I can walk that is. One thing for sure there are many _____ living off property investors.

 

I live only off share dividends, mainlly from LICs. But I am also a reformed property investor. I am currently going through the process of sorting, and disposing of, the old financial documents in my filling cabinet. From the property investments, I see a staggering number of tradie invoices/receipts, insurance claims, utility bills, etc. From the share investments, I see only dividend-payment statements. I can't deny that I made reasonable money from my ips, but it was stressful ... I was always expecting calls from property managers and there were always unexpected bills. I sold them years ago.
Shares? I love those little guys. They ask nothing of me, and all they want to do is pay me money in the most tax effective way possible.

 

Interesting. Both @TAJ and @mistercoffee mention dividend income. No mention of Capital Gains which is apparently "the" thing for many.

 

Hence I think shares are more income creation exercise whereas RE is more wealth creation exercise. Why not have both?

 

For these reasons is why not could apply.

 

Surely not half as stressful as having the feds watching you 24/7 while you had those Florida rackets running, aye Mr Suchowlański!

 

Investing in casinos in Caribbean Islands is no picnic either. You never know when a revolution might break out.

 

Funny reading this reminds me of one of the turning point for me few years ago I was looking at buying an investment property in Sydney and remember listening to a podcast with Jan Sommers , she was describing how her properties kept her busy fixing up this and that etc and how that was great and I can distinctly remember thinking that is definitely not what I want to be doing managing/fixing multiple properties in retirement!
I know I would not have to literally do that but never the less it certainly highlighted to me how much work owning multiple properties could be so not for me.. the irony that that decision somehow lead me to this website to the shares forum is not lost on me!

 

Personally to me, I think this maintenance of RE becomes justified once the portfolio grows big enough, so yes it's a catch 22, where you need more IPs more asset base to grow your CG your wealth, then the more you have more likely more maintenance and upkeep is required.
Where I tend to think differently though is that instead of concentrating on all those details, all those minor issues as I call them, I tend to look at the overall major or big picture.
For example, if my asset base just increased $2M even though on paper so via valuations (in the last 6 months), I actually don't mind that I need to deal with all that maintenance (although property managers manage that), as it becomes trivial in such terms to me.
I realize and treat my RE as if I am running a business and as such I need from time to time be in control of managing it. Perhaps businesses exist where you your own CEO can disengage, but I doubt many as such can exist long term.
So it may be risk to reward attitude that I adopt that enables me to really disregard such details along the way?
Some will see it as a pain and some will see it as a gain, as a necessary cost in doing this business. Just looking at it differently, whether the glass if half full or empty.

 

If you need cash quickly you cant sell just a bathroom but ... you can sell shares, that's my philosophy anyway

 

That is a point that is often overlooked. Many "SAY" they have a buffer in place in case of emergencies, but I'm not overly convinced that is the case.
A consideration in the latter years is that of a medical emergency which may crop up. I'm not too sure your surgeon wants the laundry from one of your IP's as payment.

 

But you could have extra cash in offsets hence no need to sell just draw down. Also drawing out equity takes longer but is also possible for some.
An investor with many IPs realises how vital CF is as in running any other business!
Anyway I always will leave as cash buffer for the unforeseen X factors in our lives.

 

another benefit with shares is that any capital gains after you become a non-resident, COULD be tax free.