The advantages of having a real estate investor's mindset in the stock market

stock analysis Dec 18, 2023

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I've always liked investing and I started out with real estate investing about 13 years ago. Had I known that I can apply my real estate reasoning and mindset when it comes to the stock market I'd be much richer today.  

I would have looked for real estate companies and their numbers in the TIKR stock market terminal.

What I did 13 years ago, investing in a single rental apartment was also quite risky. I took up debt, and I was risking the future of the investment on having only one tenant at a time. There could also be accidents, fires, and other damages that would disrupt the cash flow and the value from the investment.  

Had I known that I can think like a real estate investor, but do the investing in the stock market instead, I think I would have been much better of. For example I could have tried and get a 10% cash flow yield or more on buying into shares in real estate corporations when the stock price has dropped enough. That would be possible to find by using a screener in the TIKR terminal.

I share one example with you in the second half of the video, of the Balder stock. The company was earning money and I think the market was afraid of rising interest rates, and that the property values will fall. But the stock and company was cash flow positive and the yield was growing. In the 2022 annual report you could see that the cash flow from property management was more than 5 SEK, and you could buy the shares for less than 40 SEK at some time this year. The shares are up more than 50% since then, to 60 SEK. But I don't think it's too far into the future before you can see the company earning more than 6,5 SEK in cash flow per share on property management.  

The other example I share with you in the first part of the video is of course Costco Wholesale Corporation. Here you have a faster growing company, but a stock that appears to be very expensive.  Costco is earning about $15 per share annually soon. I have bought shares at roughly $300 and am enjoying a 5% yield now after four years since I invested in the stock. That's not much, but I think the earnings will continue growing year after year. If I just hold the shares long enough, the investment will get less and less risky, and I think I will reach a yield surpassing 10% after a 10 year holding time. From then it will keep growing in my opinion. And if that case pans out, I don't think the stock at P/E of more than 40 is that expensive. Of course I would love to buy the shares at a lower price.  

You can see what the price multiples of companies in the stock market are here, and measure the relative price level over 10-15 years. 

But if you consider buying real estate which is not on the stock market, have you calculated what P/E ratio you are paying for the earnings of it? It might not be better than owning shares of a real estate on the stock market. In fact, there might be more opportunities, because the stock of real estate companies on the stock market can fluctuate a lot. And I think there's an opportunity there. My guess is that, if you look long enough, you can find both better quality real estate, and also cheaper cash flow if you search in the stock market instead of in the neighborhood. And it's also easier to sell the shares if you need cash quickly. But then again, the market can swing a lot in the short term, and you might have to have a different temperament about the fact that you can see the price of your shares fluctuate every day. That's a big difference. But if you can focus on the numbers, what the companies are actually earning, I think you can do better if you bring your real estate mindset to the stock market.

Consider bringing your real estate mindset when you look at the numbers in a stock market terminal like the TIKR terminal here.

Gratis e-bok: Hvordan tjene penger i kvalitetsselskaper

En innføring i hvordan du kan investere bedre på børsen som en kvalitetsinvestor, tenke mer som en langsiktig investor, og unngå spekulering.

De viktigste ideene jeg tok i bruk da jeg begynte å slå børsen i 2016.

Ja takk!

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