How can I say that real estate is closely related to dividends? The two might be at both ends of the investment spectrum for most people, but if you break them down to appreciation and cash flow they are somewhat similar. The real estate market is and will always be the investment where most people can possibly reach financial independence and Wealth. It is by far the oldest form of investing known to man. It can add an additional 20K in annual income if a property is bought at the right price and if managed correctly. On the other side it can drain you by the thousands with home maintenance and tax costs. What is the secret to gaining success in real estate, buy low and sell high, while renting it out for years to recoup any initial investment outlay is a preferred method. I guess you have to buy smart and find a reliable contractor who can tell you the ins and outs of the home.
The same goes for dividends, as doing research by searching in Google for the 10 year price history of the stock you are interested in will give you a glimpse into where is the preferred price of the stock. Look at the price in relation to the highs and lows, in addition to the P/E ratio and the debt to equity ratio. These signs can alert you to major issues the company may be having. But if you stick with dividend champions or aristocrats then that investment is considered a safer bet than most other stocks.
Now when I say real estate can be compared with dividends, I am stating that the concept behind the investment is similar in some aspects but different at the same time. For a few examples see below:
| Real Estate | Dividends |
| Buy low and Sell High – Capital Appreciation | Buy low and Sell High – Capital Appreciation |
| Rent it out get monthly income – Annual Income | Dividends Pay Quarterly – Annual Income |
| Owner of the Property | Partial Owner of a Company |
| Non-Liquid | Very liquid |
| Taxes – Marginal Tax Rate | Taxes – 15%-25% Depending on income |
| Will make you look like Donald Trump to family | Will make you look like Warren Buffet to family |
| Can possibly reach financial Independence | Can possibly Reach financial Independence |
| Can be viewed as non-risky – But it is somewhat (Major Repairs / Tenant Vacancies) | Can be viewed as risky – But it is not as much (Dividend Champions / Dividend Aristocrats) |
Ok so now that you have seen the major and minor differences / similarities do you feel you are more a Donald trump or Warren Buffet type of person? I tend to see myself as a good mix of both these men because both investment options intrigue me. My goal is to one day own 3-4 properties as an owner / manager while investing surplus funds into dividend producing stocks like Johnson & Johnson. This system will eventually lead me to be content with my investing risk aversion, while diversifying total risk. I am also not going to stop investing in ETF’s and index mutual funds because they will provide a good balance to my portfolio. I want to be able to retire in peace someday, but I know as a person we all need something to occupy the time day in and day out. So these properties will give me something to do in the future. I am a high energy get it done type of person, and I do not foresee this changing well into my 60’s, but if I come across a task too difficult for me to handle I will have the means to just hire somebody to do the work.
Comment if real estate can be compared to dividends in your opinion?
Rich Uncle EL
