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does it make sense to purchase an investment property in an up and coming area like Clinton Hill/Dobro as long as the rental income covers the expenses i.e. mortgage, common charges. Am seeking capital appreciation and some rental income.
purchase stocks? Stocks have more liquidity but it seems so hard to get it right especially with all the volatility we see in the markets these days.
I already have 2 rental properties and they are both covering themselves in month to month cash flows as the rental incomes cover all expenses. The depreciation recapture means I may have to pay more taxes later if I sell them - is there a way I can minimize my tax liability?
Different asset classes, different liquidity and different long term potential. A number of investment pros are favoring real assets these days. Investment properties are real assets.
any expressed thoughts without the understanding of the individual situation is foolish. The OP does not address the diversification of assets, the age or employment situation, his personal preferences to be a landlord, the increases in taxes and expenses and or his dividend income. Positive cash flow might change when interest rate change. It is unknown if the OP interest/ mortgages are fixed or not. There are so many other variables that the question and the answer do not represent a serious approach to either the economy and or financial planning.
Thanks Riversider and realtime for your thoughts... more about me:
I am in my mid-40s and most of my assets are in real estate (2 rental in NY with 30 year fixed rate mortgage, 2 foreign properties with fixed rate mortgages), with the rest sitting in cash. All my properties are paying for themselves i.e. rental income covers all expenses including mortgage payments. I am not big on portfolio diversification just because it is typically too diversified to make any real returns over time. However I have been thinking about diversifying into stocks/ETFs lately as the liquidity profile is appealing to me. On the other hand, I think the NYC RE market has bottomed out and was thinking about adding to my RE portfolio. Am also trying to figure out the best way to minimize taxes on all these investments -- 1031 exchange etc are very new to me so any advice / thoughts will be great.
Your investment choices strongly depend on your view.
1. Do you believe that you can find good investment properties with positive cash flows of more than 5% on your downpayment (after maintenance, no rent increase, mortgage, periodic reno, vacancy, cost to manage etc) without price appreciation? Probably very good as property price appreciation and rent appreciation will add additional returns.
2. For stock market, unless you are very investment savvy, stay away from single stocks or sector investments. Index investments, if you choose the right entry and exit points are great. There is a big sale every few years in stocks (30-40% off). Get in then and sell when things have been good for a while. Do not buy at full price. Of course, there are more sophisticated ways to decide whether the market is fairly valued or not. Generally, value oriented companies like Grantham publish fair value estimates. I believe Grantham's fair value estimates at at least 20% too low and remain that way. The key for index investments is either to panic very early when the things are going sour or hold it and put more money when things look really bad.
Am also trying to figure out the best way to minimize taxes on all these investments -- 1031 exchange etc are very new to me so any advice / thoughts will be great.
Don't be cheap. Speak to an accountant. Otherwise you are asking fake questions as you seem happy with what you are doing.