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Comment by hiddencost | Hacker News Reader

I've done the math for a bunch of properties family and friends have owned, and they were never beating index funds.

Do the math and you'll find that putting your money in an index fund almost always beats real estate, with much less risk and much less work.

It's easy for one property to underperform the market by a lot. It's hard for an index fund to do the same.

I own a $1.5M rental home in a luxury destination and profoundly regret it. The amount of work I put into it was enormous. I'm not outperforming the market, and I can't sell it because the mortgage rate is 2%.

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I've found this to often also be the case, but leverage completely blows these numbers up.

you'd be right if someone was willing to let you lever up 5:1 and bet on index funds. however you can only accomplish this with real estate, and with such leverage the required rate of return is far lower to make it worth it.

TQQQ is 3:1.

Every time I ask people to factor in their time in managing the property (yes, even time spent finding the property to buy counts), they end up way behind.

Volatility decay means if QQQ is flat, TQQQ is negative. It also consumes your dividends.

How is that different than leveraged RE? If the property value is flat, you’re in the red due to interest.

I suppose you could ask ChatGPT or another AI how to calculate Volatility Decay and it would give you a pretty good answer that you can compare against the fixed interest rate of the mortgage. A lazy way to calculate volatility decay might be to add the returns of TQQQ and SQQQ together, divide by 2 then subtract that against QQQ and then subtract out the dividends.

But that doesn’t take into account how RE is providing you with shelter and additional SQ footage. If your total mortgage, insurance and taxes are less than renting, which is the case with mine, then there is pretty much no way to be at a loss with real estate. There’s pretty much only upside then over any 3-5 year period.

Yeah, no one ever accounts for the labor requirements for these projects. If you can earn $100/hr from your career or contracting work, then spending 20 hours per month finding tenants, mowing lawns, fixing plumbing issues, etc, gets expensive fast.

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