On principle, one should only buy investment in form of property in the best neighborhood. It’s better to buy a come down property in an expensive suburb at a low price than buying any new property in a new or fashion suburb at a normal price. Fashion comes and goes.

One should never buy by a river, close to a lake or ocean, where landslides could occur or in a dip where water can collect during torrential rains nor on unstable grounds.

When buying new property it’s important that insurance has been taken out by the builder or construction company to cover building errors which might show up later.

Otherwise, find out if you can have a rental contract accepted for 6 months only based on some personal rental conditions. That way you have some idea of what sort of tenant you will have.

It may be wise to discuss this with a real estate lawyer.

I like the comparison. If are not a handyman, an investment property especially a house can create a havoc in the middle of night when tenant start calling for trouble i.e., water pipe burst in kitchen on a winter night.

I would like to add another dimension to your analysis. Treat stocks as investment rental property. Sell a covered call(what I call rent the stock) on MO for every two months. At present, it is generating a return (rental income of 1.5% every month) while you will be entitled to receive dividends as well.

For more discussion, please visit:

http://optionsforstocks.blogspot.com/

I think Joe has a touched upon a good point. For me personally, I don’t want to have to deal with all of the hassle of investment property, especially after just viewing what Professor Schiller said about housing prices over the past century.

If one is seeking diversity through real estate, REITs would seem to offer a much easier approach.

I’d stick with the stock. Here’s why…

I’m not cut out to be a landlord, and if Altria (or whatever stock) took too much of a hit it’s easier to minimize my losses and sell it. Real estate is a fickle beast, and not as easy to sell when things turn south.

Here’s an idea: why not split the difference and invest in a REIT, or REIT index like Vanguard’s VNQ? REITs (like the underlying real estate) have taken a hit and are selling at a discount. They pay a hefty dividend, and you can let someone else be landlord!

I think that it ultimately comes down to what a person is more comfortable with.

A lot of people think stocks are risky, and they feel that property is more substantial.

I personally feel more comfortable investing in stocks, and I feel that my trading system gives me control, because I’m not just buying and holding.

Another thing to be aware of with real estate is that the costs like property taxes go up while, once you buy a share of stock, you do not have to keep paying for it.

Maybe it is not a concern in California, because of Proposition 13, but here in the Chicago area, the property tax on my house has gone up from $7,233.58 for tax year 2003, to $10,783.46 for year 2007.

That is a 49% increase in 5 years, or 8.3% per year.