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Originally Posted by David - PG
Finally a post that makes sense after all this bullshit advice.
Morningstar.com. Keep your eyes on ETFs with low fees, no need to pay an ivy league bank 2% annual management fees when you can get better performance from index ETFs @ 0.45%.
Buy entire markets (or sectors like Biotech, Banking etc.) w/ ETFs. USA, Europe, Asia, Emerging Markets. Add natural resources (oil futures, gold etc.). Keep some cash on a fixed deposit in cash opportunities to buy at lower prices come along. Once you grow enough $$$, add high quality hedge funds at 10-20% of your total portfolio to lower volatility.
Then sit on this for 3-5 years. This is how trillions of US Dollars are being made around the world every year. And have been for 50+ years.
All the real estate gurus here, please, tell me one thing: If there is absolutely no risk and it's so fool proof. Why arent't the banks themselves financing their own deals? Why are the banks coming to you - some naive investors - to take a 500k mortage without _ANY_ risks that is guaranteed to make you 100% fool-proof profits in just 18 months?
Fact: The banks are using _YOU_ to take their risk and they cash in on you, 99% risk free. Risk free money making, gotta love that.
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A lot of hedge funds do real estate, as do investment banks. Traditional retail banks just want to get as many deposits as possible and make money off the float. They charge you 7% for a mortgage, but pay 1% for the deposit, so they are basically making 7x their money. Why would they do real estate when they can do this?
With real estate, you make money from LEVERAGE. You do not make money from paying cash for property, which is what a bank would do. Grade A real estate would return about 6% plus 3% per year average in appreciation, but when you add leverage in the mix, those amounts are tripled. It is no different than buying stocks on margin or using options.
Your average retail investor who can only put $15k/yr into their IRA should stick to ETF's. But if you have $200k to invest, *commercial* real estate is a better option. Residential real estate is too speculative and property values are too subjective. (high priced) commercial real estate values are based on the property's income, nothing more!
One good option for the retail investor might be to buy some real estate ETF's or some REITs that own propery in stable, boring markets, although REIT's usually only leverage 50%, so there isn't as much a return as if you did it yourself.