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Which Is the Better Investment, Real Estate or the Stock Market? The Debate Continues

April 22, 1990

Regarding "Real Estate vs. Stocks: Which is Better," no argument when you buy rental property so that the rents always cover the debt service and you have tax benefits from the debt service and depreciation.

However, one gives up liquidity to own real estate, which makes it sometimes totally out of the question for retirees, small pension plans, etc. Also, if the rents don't cover the cash flow or are interrupted, you have negative cash flow. That's like buying IBM stock and paying them the dividend while you hope it goes up in value. It also assumes one always "qualifies" for the loan, which is not necessary with buying stock or mutual funds, let alone the hassles of being a landlord.

Surveys point out that few people in this area can afford to buy a home. Couple that with the downsizing of the defense industry employers and you have a serious question about the (real estate) demand factor. Assumptions about break-evens in rents or appreciation may not be as well founded as in the past. Tried to sell a house lately?

RON SMITH

Redondo Beach

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