How I Turned $1,000 into a Million Dollars in Real Estate ...

is a real estate book that was written by William Nickerson in the 1950's.

It is truly a "how-to" classic with a proven formula that still works today ... but it is no longer in print.

The book by Nicholas Darvas that is titled "How I Made Two Million Dollars in the Stock Market" was also written in the 1950's.

It too is a classic and it *is* still in print today.

Question ...

If you take a poll and ask 100 people what is a better investment ... real estate or the stock market ... I bet the majority would say real estate.

That being the case, why is the Darvas book still available from bookstores and the Nickerson book is not?

Also, if most people think real estate is a safer investment than the stock market, why are 10X more stock market books written each year than real estate books?

This discussion board has a lot of brainy people on it and I would be interested in getting your take on this.

Robert Campbell




Timing the Real Estate Market for optimal profits

Hi,

I'm not sure I qualify as one of the brainy people you mentioned--wait a second, that's wrong, actually I am one of the brainy people you mentioned and it's stupid to act humble, especially about smarts which is a common attribute and one that is not that important any more.

Though I admit to being brainy I'm not sure I can explain what I want to in this message.

Trading is sort of science-like: you study charts, you use mathematics, you collect and evaluate data; trading is sort of beating the market into submission with the power of your brain. I can picture Mr. Spock as a trader--heck, half the time he probably had commodity barcharts displayed in that little box he was always staring into, looking for trends and markets on the move (or it could have been Romulan adult websites).

Real estate, on the other hand, is action oriented rather than intellect oriented. (I can't imagine Mr. Spock driving around looking at properties or doing deals. inspecting walls and checking plumbing; that's the kind of thing Kirk would have been good at. Hey, maybe there's a Kirk/Spock dichotomy between real estate investing and trading.)

That's all I got, and it was probably more than you wanted to hear.

Just my opinion,

- Boyd

dno

> That being the case, why is the Darvas book
> still available from bookstores and the
> Nickerson book is not?
> Also, if most people think real estate is a
> safer investment than the stock market, why
> are 10X more stock market books written each
> year than real estate books?

Simple economics. Think about it:
Most folks can get into the stock market at a pretty reasonable price ($100 or so if you open up a DRIP account). Even full service brokerages will take you with a mere $5k to $10k.

How many real estate properties can you buy for $10k?

How much work does it take to sell your stocks and how quickly do you see the profit? Compare that to selling a piece of land and seeing the profit.

You might have a painting that's worth $1,000 ... but if it's not selling that capital is tied up and isn't really gaining anything. You'd do better to buy 1,000 glowsticks and sell them at a festival for $3.00 each... you'd get an almost instant return and can triple your money in a weekend if you've got the right market.

Hi Mel,

Using your glow stick example for investing in stocks (?), are you therefore trying to say that it's easier to make a $3,000 profit in stocks than in real estate?

Please explain.

Robert Campbell

> Also, if most people think real estate is a
> safer investment than the stock market, why
> are 10X more stock market books written each
> year than real estate books?

Can't comment on the number of books written... only the number of books published.

The publishers will continue to publish what sells the most.

As they are publishing more stock market books, it would appear stock market books outsell real estate books.

WHY?

Because of the media.

When was the last time you heard the mass media mention anything about any kind of instant wealth due to property?

People know property is a buy and hold thing. They want it to be faster and cost less.

Enter the "No Money Down" idea. Enter the "Subject-To" and "Lease Option." Enter "Wholesaling." Satisfies the instant gratification crowd.

Something a lot of the RE sellers mention is their dislike of fixing toilets. And so they hire a property manager.

This has always puzzled me. If your toilet is broken, call a plumber - that's what the property manager does.

Anyway. The difference is: stocks take far less cash, is quicker and easier to get into, involves zero negotiating, and doesn't require any bank red tape.

Property, on the other hand, requires money (if not yours than someone else's), time, bank red tape, title companies and/or settlement people, negotiating, time, money spent on advertising, credit checks, employer checks, did I mention time? Research, education and learning, time, and sometimes real estate agents.

Negotiating. Bank red tape. Real estate agents. SLOW turnaround. Long Time. Money. Everything people hate. That's what real estate investing means.

Go to the discussion boards devoted to each topic - real estate vs stocks. See the million real estate questions... here is a house and they sellers want $350k, it has zero equity, will rent for half the mortgage payment and is about to go into forclosure... how can I buy it? Or, is there a deal here? Or, I have bought it subject-to now what do I do?

Basic hand holding questions. Questions of people looking for an easy way. Questions from people who can't be bothered reading archives or spending a few bucks on a real estate book.

Don't see anyone asking such basic questions on stock market boards? Don't see people saying, "XYZ shares went up 1 cent today after falling $25 over the last two months, should I buy them now?" (At least not on the stock boards I go to.)

It's the same reason why in stock market investing, the main thrust... the main way people want to invest their money... is in quick turn stuff. They can see the success that long term Buffett-style stock market investing has... they even hear the stories of the traders who go $100k in the hole in one day... but the lure of the quick and easy overshadows all of that. Just like the lure of the quick and easy - subject-to, wholesaling, lease/option, no money down - oversadows the 25% down thus creating a positive cashflow, the book you mentioned talks about (I beleive that's its basic concept. Please correct me if I am wrong).

And the final reason... which would certainly apply to some people... is one of stigma. Being a landlord vs being a stock market investor.

Michael Ross


Discover how we generated $2,142 worth of business with a 15 word ad, within one month

Hi Robert,

You already got some excellent answers from Boyd, Mel, and Michael....

I'll just add that the stock market can be addictive!

It can be very exciting, since you always know exactly where you stand.

With property, you only really know exactly where you stand when you sell. Of course, you can get an "idea" by making an estimate of what your property is worth, but you only really know when a buyer comes and pays you a certain price for it.

The stock market is different. With stocks, you know exactly what your stocks are worth every minute that the market is open.

Your fortunes can go up or down by thousands of dollars in a day! Because of this, it's very easy to get an "adrenalin rush" from stocks.

When you do well with stocks, making money never seemed so easy.... (Of course, the flip side is when you're doing badly, losing money never seemed so easy either!)

The stock market is NOT a casino - while there is an element of chance, as there is with anything business-related, there are also rules of logic too. However, even though the stock market is not a casino, it can have the addictive properties that a casino can have too.

- Dien Rice


This is what I do while I wait for the stock market to open!

Dien,

First of all, congratulations.

You gave the exact answer to the question: the stock market is alluring because of the element of addiction it shares with the games of chance.

But... you immediately corrected yourself.

'Of course, ladies and gentlemen, the stock market (like business) has it's 'rules' and 'logic''.

It's very interesting to play stupid with defenders of 'reason' and 'logic'.

So, let me play stupid and ask you:

'WHAT are those 'rules' and logic that the casino games LACK?'

My point is that if you try to 'reason' statistically, the odds of succeeding in business and stock market on the one hand and the odds of succeeding in casinos are the same.
(And please, don't refer to the so called 'success stories'; for every business-stock-market success story there is a story of lottery-casino winnings).

Just look at the marketers and business consultants using the metaphor of 'stacking odds in their favor'.

Implicitly they FEEL that the 'games' are essentially the same.

What are the odds of coming out with a successful book, succeeding in restaurant business etc..?

So, what is your answer to the stupid question?

Simon

> 'WHAT are those 'rules' and logic that the
> casino games LACK?'

> My point is that if you try to 'reason'
> statistically, the odds of succeeding in
> business and stock market on the one hand
> and the odds of succeeding in casinos are
> the same.

It depends what you call succeeding. If by succeeding you mean ending up with more dollars than you started with, then I'm pretty sure the number of stock market investors who succeed at that is much higher than the number of gamblers over a decent time period.

You can view casino games as logical because they follow a very defined set of rules. Playing them is a fairly illogical activity, however, at least from a profit perspective since the odds are always stacked against you.

The main difference I see between casino games and business or the stock market is that the latter two do not have fixed odds -- they depend somewhat on your skill, experience, knowledge, as well as luck.

Hi Simon,

One thing you are very good at doing is asking questions that make people think!

You said,

"...If you try to 'reason' statistically, the odds of succeeding in business and stock market on the one hand and the odds of succeeding in casinos are the same."

I actually think the "odds" are probably not the same.... I think on average, in the stock market you will tend to make money, whereas in a casino you will tend to lose money.

For example, let's say you invest in the stocks that make up the Dow Jones Industrial Averages Index. In July 1936, the DJIA was 164.90. In July 2003, the DJIA was 9233.80. When you calculate it, that means that if you invested in the DJIA during this time, you got an "average" return per year of 6.19%. (It's not a lot, but you'd still be making money.)

On the other hand, let's say you spend your money in a casino. To take an example, let's say you're playing American roulette. With roulette, the odds are that for every $38 you spend, you will on *average* (over many spins) lose $2. That means that with each spin, you are on average losing 5.26% with every spin. On average, you are losing money, not gaining it.

(You can read more about roulette odds here - http://www.gambling-hall-online.com/roulette/roulette_odds.htm )

Therefore, it seems to me that odds of succeeding are not the same.... In the casino, on average you will lose money. In the stock market (at least with the example of the DJIA), on average (over many years) you will make some money.

There's a lot more to answer your question though, as a full answer of your question would have to be a discussion of what causes the price of a particular stock. Clearly there are a lot of factors which cause the price of a stock - how much the company is making in profits (or losses), the expectations of future profits (or losses), macroscopic factors (the general economy, currency exchange rates, interest rates), political events in the world, and so on. It's clearly very complicated.

What Warren Buffett seems to assume is that in the *long term*, the primary factor which creates the price of a stock are the net profits the company makes. He thinks that this factor is far more important in the long term than all the other factors.

Buffett then chooses stocks in specific companies which have qualities which make their future profits easier to predict with confidence. He chooses companies which have strong monopolies or which are "strong franchises" - which means it is difficult for other companies to jump in and compete with them. These companies are also generally less strongly affected by the various "macroscopic" factors too....

By doing this, Buffett can make "safer" investments in the stock market than many others. As I've mentioned before, in general I try to follow these kinds of assumptions too in my own investments.

If these assumptions are correct, then that means that at least for some stocks, future profits can be "predicted" with at least a degree of accuracy. From there, it's a matter of calculating what the company (and hence the stock) is "worth". If the current price is far below what it's "worth" according to these calculations, then it is "undervalued" and could be a good buy.

Well, there's a quick answer anyhow.... :)

- Dien