Real Estate Investing
Almost two-thirds of Americans have already made a real estate investment. According to Census data, 65 percent of single-family homes in the United States are occupied by their owners. A home purchase is the largest investment made by Americans.
When it comes to investing in real estate outside of their home, the majority of people choose commercial real estate. According to Gus Dahleh, investing into commercial real estate structures where people live or work will almost always bring the most opportunity for wealth creation through real estate. Investing in real estate rather than equities has advantages. Real estate has inherent value since it is a physical asset. It isn’t simply a piece of paper, like a stock certificate. Even in the worst financial collapse, real estate will most likely always be worth something.
An apartment building or an office building, both of which create cash flow through rent payments, offer more opportunities to increase property value and grow the net worth of the investor than traditional residential properties. Gus Dahleh adds that savvy investors in commercial real estate look for vacant or mismanaged commercial properties in a good area that can be bought for fifty cents on the dollar and later converted into positive cash flow assets once leased out to quality, long term tenants, such as credit tenants.
Real estate does come with its own set of costs. Even if it is a vacant piece of land, you must pay property taxes on it. When you buy a building and rent out flats or workplaces, you must pay both property taxes and maintenance costs. You will have to deal with all of your renters’ problems unless you employ a management company, which is an additional cost.
Another issue with real estate investing is income taxes, yet real estate is normally a tax-friendly investment. If you are a qualified homeowner, you can deduct up to $750,000 in mortgage debt interest. If you own commercial real estate and sell it, you can avoid paying capital gains tax if you buy identical property or take advantage of MACRS depreciation. However, there are numerous fees involved with real estate transactions, such as real estate agent fees, which may be as high as 6% of your selling price, and closing costs, which can be another 6%. Keep in mind that investing solely in real estate assets is tough to diversify.
Investing in traditional real estate is not the only option. You can invest in REITs, which trade like stocks on the market, to boost the liquidity of your portfolio. They usually pay out a high dividend yield. Over the years, Gus Dahleh has formed relationships with a number of publicly traded REITs. REIT’s love investing in low-risk, profitable, passive deals, and if you can bring those deals to the table, they will surely consider doing business with you. You can also buy real estate portfolios that have already been diversified for you.
The bottom line is that real estate investments can create a nice, passive cash flow, but you will pay expenditures and your money can be tied up for a long time, which is not always a bad thing. Real estate is a non-liquid investment. However, if you want to protect yourself from inflation and market volatility, real estate is the way to go. When comparing real estate to equities, you’ll see that real estate typically appreciates in value when inflation rises, as seen recently in 2020 and 2021.
Stock Market Investing
Gus Dahleh began his financial markets career as an equity options trader at the Chicago Board of Options Exchange and over the years developed proven option strategies for the U.S. 30 Year Treasury Bond and Gold Futures based on seasonal and technical patterns.
Stock Investing is a method of accumulating wealth through the purchase of stocks. When you buy a stock, you are actually purchasing a small piece of a corporation. A stock’s value can plummet to zero, but this is unlikely to happen in real estate. A stock portfolio is significantly easier to diversify than a real estate portfolio. You may buy shares in a number of firms for a fraction of the cost of diversifying a real estate portfolio.
Stock investing does not necessitate the substantial transaction expenses associated with real estate. There are no closing costs, and there are no brokerage fees to pay. If you utilize one of the many free stock trading apps available, you can invest on your own and even buy fractional shares.
Gus Dahleh believes a stock portfolio is significantly easier to diversify than a real estate portfolio. Many seasoned investors may disagree with the finance theory that it only requires nine to thirteen well-chosen stocks to diversify a portfolio, but focusing on a few solid companies has been the key to success for longtime investors like Warren Buffet. In truth, according to Warren Buffett, you need a portfolio of properly selected companies from various market sectors and businesses that are likely to do well over time. One thing you don’t want to do is panic-sell if the market falls, so keep that in mind if you experience one of the temporary market corrections that occur a few times each year, specifically during September and October, which are the notably worst performing months for the stock market since its inception in the 1900’s.
Stocks are a type of liquid asset. You can usually buy and sell on the spur of the moment, giving you immediate access to your funds. When comparing real estate to stocks, you’ll see that selling a real estate investment can take weeks, months, or even years.
Stock investment inside a tax-advantaged portfolio can help you build wealth. Investing in an IRA or 401(k) allows you to grow your money tax-free until you retire, at which point you may be in a lower tax bracket. If you own stock outside of a tax-advantaged portfolio, you will face income tax consequences if you sell it. If you sell within a year of purchasing it, you will be subject to the higher short-term capital gains tax. You will be liable to the reduced capital gains tax rate if you sell after a year.
Many stocks produce current income in the form of dividends, which is analogous to the current income generated by real estate assets in the form of rent payments. Rent payments can be used to balance income taxes, but dividend income is more difficult to offset because expenses are lower when you own stock.
Gus Dahleh believes one of the best stock investments you can make long-term are dividend stocks. For example, if you invested $200,000 today in a high yield dividend stock, say 10% annually, you would be looking at around $27,712,778.80 in 50 years, with a compounding annual dividend income of approximately $2,700,000 if you continued to reinvest the dividends into the stock. One of the most known investors who’s made a fortune from dividends and compound interest in the stock market is Warren Buffet, who currently earns $3.1 Billion in annual dividend income.
Gus Dahleh’s Final Thoughts
Market volatility, cash flow, diversity, management and transaction expenses, liquidity, tax benefits, and your personal time and effort should all be considered when deciding whether to invest in real estate or stocks, or both. For stock and real estate investing, each of these characteristics has advantages and disadvantages. It all boils down to your own risk tolerance, time horizon, and investing objectives.
About Gus Dahleh
Gus Dahleh is a real estate entrepreneur who specializes in commercial real estate development with a primary focus on distressed assets. Since 2010, Dahleh has acquired over $50 million of commercial real estate assets and entered into long term leases with JP Morgan Chase Bank, AT&T, Walmart, Sam’s Club, and CubeSmart. Gus Dahleh has also developed a niche in the cell antenna industry by selling lease revenue to publicly traded REITS which include American Tower and SBA Communications Corp. Gus Dahleh began his financial markets career as an equity options trader at the Chicago Board of Options Exchange. Gus Dahleh has developed proven option strategies for the U.S. 30 Year Treasury Bond and Gold Futures based on seasonal and technical patterns. Gus Dahleh has a proven track record for providing direction on how to maximize the value of the commercial real estate and financial market investments. For more information, visit GusDahlehBlog.com or follow Gus on LinkedIn, Twitter, Instagram, Youtube, and Facebook.
