Ben Stein Not Hot On Real Estate

Here’s an excerpt from Ben Stein’s column about why he thinks real estate isn’t such a great investment.

That means the house has kept up with inflation — barely.

In fact, when I do the math, I realize that it hasn’t fully kept up with inflation. Plus, the owner would have had to pay rental fees (it’s on land leased from a Native American tribe), condo fees, taxes, and insurance. Granted, he would also have gotten the great pleasure of living there, but it wouldn’t have been a great investment at all.

On the other hand, if the same person had bought the Dow in 1982, he would’ve made roughly 10 times the money by now, not counting dividends, which would have meant he would’ve made close to 20 times the money.

Still, my wife and I bought our house in Malibu for $600,000 in 1990. It might have gone up by 150 percent since then, but in that span, the stock market has more than tripled on the Dow, counting dividends. Other indexes such as foreign stock indexes have gone up vastly more than that.

So while at the end he admits that

yes, real estate rules. It’s a good, even great, investment — just not the perfect investment.

I still don’t think he did a proper comparison.

1. Your home is not an investment.
2. If you pay cash for investment real estate, you get rental income. He didn’t consider this.
3. If you got a mortgage your leveraged returns are significantly more than the appreciation you got. For example if you put 10% down, and the property appreciation 10%, you just made 100% return (excluding selling commissions, which is justified since no one considers those when talking about stock performance)

Anway, you can form your own opinions and read the whole article here

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