Matt Faircloth: What's going on, everybody? It's Matt
Faircloth from The DeRosa Group. Some folks think that the stock market's the best place to be,
and other folks are anti-stock and think they're real estate is the best place to be.
We're going to hash it out. By the way, if you guys like what we do here at The DeRosa Group
and our YouTube channel, make sure you guys hit that like button and smash that
subscribe button. Matt Faircloth:
Now that we've done that, we going to lay down and talk about the benefits of
stocks versus real estate, guys. That's today's conversation. I am an unbiased source. I'm
going to represent real estate to bring it in to represent stocks. You guys might know this person.
I know no one better. He's been on the trading desk and many, many years of stock experience.
And that is the Herve Francois. Herve Francois:
We're talking about stocks today. Let's go at it. Let's do it, man.
Matt Faircloth: So, is there like 20 years
worth of Wall Street experience? Herve Francois:
Yes. Matt Faircloth:
Well, one of the reasons why I believe Herve has an unbiased opinion here, you were not paid
necessarily commission based on what your clients invested in or whatever. You just
bore witness and structured deals and- Herve Francois:
Absolutely right. Matt Faircloth:
Why does every financial planner who really represents these things.
For my financial planner friends out there, I love you guys, but you, my friends are biased
to this because your compensation's based on this. Herve, he's going to give us a truly
unbiased opinion on it. Herve Francois:
Very much biased opinion from my experience and from many other people's experience.
Matt Faircloth: We're going to go tit for
tat. I need a boxing ring. This is a good reading here. We could just Rock 'Em Sock 'Em Robot.
Herve Francois: Right here.
Matt Faircloth: [crosstalk 00:01:23] the whiteboard.
Herve Francois: This is going on the whiteboard.
Herve Francois: So my first, first big strength, liquidity. What I
buy today, I can sell tomorrow. Yeah I'll pay the commission, but that's all right, I'm out of it.
CEO might've passed away, a competitor comes in. Amazon says, "Hey, we're coming into your
space. Lights out." Matt Faircloth:
Herve's right. Real estate is not liquid. That's one of the great things
about real estate. So I'll give him that. But here, the fact that real estate's not
liquid is a benefit to real estate. Even though real estate prices have gone whoa,
up a lot, 15, 20, 30%. Here's the thing. Lots of stocks go up 15, 20% in what? A month.
Herve Francois: I guess in a month. Sometimes in a day.
Matt Faircloth: The fact that real estate going up 15, 20,
30% in a year is a conversation. So real estate is way more steady of price points. The reason
why real estate's a steady price is I can't panic sell real estate. You think you can,
but you can't sell it the way you can panic sell this. Real estate's not going to do what the stock
market does and crash and drop 20% in a day. It might drop 20% over a long period of time,
but I can't say, "Well, real estate's starting to look a little shaky. I'm going to sell that
duplex and I'm going to liquidate it tomorrow." Real estate's a steady price and that's because
it takes months to buy, months to close. What do those months of time shake out for liquidity
with motion? FOMO on the high side. Fear of getting your butt kicked on the down side.
Herve Francois: That's right. That's
right. [inaudible 00:02:58]. Matt Faircloth:
That liquidity is good in stock because I get my money back out. I can get in, I can day trade.
Herve Francois: We like the volatility. We like the volatility.
Matt Faircloth: I can't play volatility as much.
Herve Francois: Exactly right. You cannot [crosstalk 00:03:09].
Matt Faircloth: You can, wholesalers,
that kind of thing. So while I can play volatility, you can, but not like you can here.
Herve Francois: No. Absolutely right.
Matt Faircloth: What's Amazon stock worth today? While I go on my
phone, it's worth $1,427.97. That's what it's trading for. What's your house worth? As much as
Zillow and Trulia and your online apps might tell you what they think it's worth, it's really hard
to tell the true valuation of it. And the only reason why stock pricing is so spot on and it's
transparent, what's going on is because you've got so much volume. The only way I know what my house
is worth is by the three or four people that are willing to buy it and they make different offers.
That's my value is what the market will bear. If I own Amazon stock, I put it up for sale,
millions of people are buying and trading Amazon stock at any given time. It's very easy
to determine what a stock's price out. What's the trading out right now? These last 4 million people
that bought the stock paid $1,437.92, right? Herve Francois:
Right. Matt Faircloth:
So that's what it's worth. I got a lot of data and audited financials statements.
Herve Francois: And it's the audited financial statements
that give me a level of comfort when a company goes ahead and they report the [inaudible
00:04:15], this is what our revenues were. These were our costs. This is what our net income and
our balance sheet and so on and so forth. Matt Faircloth:
You ready for my volley? Herve Francois:
Yeah, I can't wait until you twist this. Let's see how you're going to spin.
Matt Faircloth: I'm not going to twist that.
[crosstalk 00:04:21]. I got one you probably could argue with me on,
but I'll go for it. And that is, I've gotten more diversity. Exxon and another one, BP.
Herve Francois: Exxon and BP. Absolutely.
Matt Faircloth: Competitors tend to drag each other down because
industries are viewed as a full sector world. Exxon's having problems. And the other. All
oil tends to move the same direction. All healthcare tends to move the same direction
in stocks. Now, although these real estate markets are affected by the same
global figures like interest rates and things like that, if San Francisco experiences a slowdown
because rents went up a little bit or whatever, it's not going to affect LA aside from the global
forces that affect all things like interest rates and things like that. Market diversity.
What I mean by that is that I can put all my eggs in a market's basket.
Matt Faircloth: And if I want to benefit from an uptick
in oil and gas, I can invest in a market that benefits from [inaudible 00:05:22] like Houston.
I can still benefit from the stock market changes that may happen by investigating in
markets that are influenced by that. If I think Airbnb is going to be a big thing, I can invest
based on trends I see, but what happens a couple towns away likely won't happen in
my market. Good and bad, but I can really have diversity and compartmentalize my investment
with real estate. What do you got? Herve Francois:
Okay. All right. All right. Not too bad. Matt Faircloth:
Give me a few more. [crosstalk 00:05:53]. I might need another whiteboard.
Herve Francois: You're not going to need another one.
You're not going to need another one. Let's go. Matt Faircloth:
[crosstalk 00:05:57]. Come on. Come on. Come on.
Herve Francois: I'm going to go with the I don't need to
create a market when I'm buying and selling stocks. The market already exists. Obviously,
especially if we're talking about large cap stocks like the Microsofts and Amazons of the world,
the mid cap stocks, maybe not the microcap stocks where kind of trades by appointment. There's not a
lot of liquidity, but definitely for your large and mid cap stocks. I may lose out on my trade,
whether I'm buying or selling, but there is going to be a market for my trades.
Matt Faircloth: Because your market is more
established, I think. Herve Francois:
It's much more established. It's more more widespread. I can trade right here on the
app on my phone. Matt Faircloth:
I'll give you that. Herve Francois:
I'm good to go. Matt Faircloth:
I shall not debate that. Herve Francois:
Good luck selling [crosstalk 00:06:38]. Matt Faircloth:
Touche. Touche. Matt Faircloth:
And although there are stock investments that will give some of this to you,
there is no stock investment that I've ever seen that gives you the level of
tax advantages that real estate gives you. Herve Francois:
[crosstalk 00:06:51]. Matt Faircloth:
Boom! Herve Francois:
Did you really [crosstalk 00:06:51]. Matt Faircloth:
You knew it was coming. [crosstalk 00:06:53]. You knew it was coming.
I went there. Herve Francois:
Oh, man. Matt Faircloth:
Real estate delivers a phenomenal depreciation benefit, cost segregation studies. You don't
pay all the tax on what you earn and you can play phenomenal tax advantage games
in real estate where there's a little bit, but it's nowhere near what I can get here.
Herve Francois: I got one for you.
Matt Faircloth: What do you got? What do you got?
Herve Francois: I'll break it down [crosstalk 00:07:14].
Matt Faircloth: Okay, come on. Come on.
Herve Francois: [crosstalk 00:07:15].
Matt Faircloth: What do you got?
Herve Francois: Very little capital
to get started. Matt Faircloth:
Wow. You had to go there. Herve Francois:
Yeah, I went there. Matt Faircloth:
But you're right. You've got penny stock. You've got penny stock right now.
Herve Francois: Listen, you can not only buy a
penny stock. I'll tell you what else you could do with that we weren't able to do when I was
working on the street back in the days. Through an app such as Robinhood, you can buy fractions
of share. So for example, if I didn't have $3,300 to buy one share of Amazon today, I could buy a
half a share of Amazon or a quarter of Amazon. Matt Faircloth:
I will give you that. For 10 bucks you can buy a stock.
Herve Francois: That's right.
Matt Faircloth: I can leverage real estate because
it's sticks and bricks, baby. Herve Francois:
Yes it is. Matt Faircloth:
I can put liens on this. And the reason why I can leverage it is because of this,
because I can't move. This is a steady price. The reason why they will let you leverage
real estate is because it's sticks and bricks. It's a hard asset. Right?
Herve Francois: Right.
Matt Faircloth: And so because it's a hard asset that has
been market proven over hundreds of years, that it's not going to go this tomorrow and this today.
So because of that, banks will let me borrow against it. That means I can buy $100,000
property and lay 20 grand down. It does take more money to get involved in real estate. He's right.
We got to give him that. Herve Francois:
I'm calling up the big R word. Regulation. Matt Faircloth:
Oh, he went there. Herve Francois:
I don't know what goes on in that side of the world.
Matt Faircloth: [crosstalk 00:08:38].
Herve Francois: No,
no, no. We are the only one transforming lives. Everyone else is destroying lives on that side.
Matt Faircloth: I have a comment on that one, and I don't disagree
with you. What do you mean by regulated market? Herve Francois:
What I mean about regulation in the stock market is there's a lot of rules
and there's a lot of policies put in place really to protect you the consumer, the buyer,
and the seller of stocks. There's a lot, a lot of regulations in regards to how much you can trade,
the rules of trading at market open, market close and so on and so forth. Make sure that you're not
getting messed up on your order being filled. Matt Faircloth:
You have a lot of scrutiny on your numbers. This isn't all squeaky clean land. There are people
that cook their books and there are companies that have gone under for lying and stuff like that.
But the probability of that happening here versus happening here is a whole nother world. This is
like the wild wild west. And all though there is regulations [crosstalk 00:09:28] real estate state
and the SEC is involved over here, the level of scrutiny, and I think it's changing, and I think
that this is going to start to look more like this under the regulation world as more and more people
are able to buy real estate on their phones. So I think this will normalize, but for now,
Herve is absolutely correct. Your probability of getting swindled or told that something's going
to do this and it ends up doing this is very, very far and few between-
Herve Francois: On a relative basis [inaudible 00:09:55].
Matt Faircloth: ... here than it is here.
Matt Faircloth: Real estate is tangible, and here's
what I mean by that. Tangible, and not just that I can reach out and touch it. Yes, I can reach out
and touch it, it's sticks and bricks and I can't reach out and touch Microsoft. I can use their
product. I can use an Amazon product, but it's very hard to actually see and touch and feel and
smell and experience my investment. With real estate, you can. You might not choose to,
but you can. Although I've got regulated financial statements and everything like that,
but for a well-run asset that's very transparent, I can look through it and see exactly how it's
doing. Here's how the financials is doing, here's how much cashflow it's making me,
here's what it's not making me, whatever it is that I can manipulate it and change it and say,
"Oh, I probably should raise rents." Matt Faircloth:
Or, "I should probably refinance that property." "I should probably sell it." That tangibility of
it, that I can control it and reach out and touch it, allows me to be more visible on it, touch it,
learn from it, and also I can affect people's lives with it. We at DeRosa Group have sold
multiple properties to people that live there. So because it's tangible, I can see it and I
can do good with it. Now, you can do good with stock. I can invest in companies that do good,
but that's several iterations and deviations away from me. Now, you guys can put in the comment
section who you think won. Of course I'm preaching to the choir because we're on a real estate
YouTube channel. Here's the real thing, guys. And I think Herve and I would agree on this.
Matt Faircloth: First of all, what works
for you and your investment goals. If you want something liquid that you can get in and get out
immediately, then stock may be for you. So if one of these things here
speaks to your inner why on why you want to invest and why you want to build wealth for yourself,
then certainly do this. But what I believe is that there's diversification. You should have a little
bit of this and a little bit of that because these are all good reasons. And I'm not saying Herve's
wrong on any of these reasons, and Herve wouldn't say I'm wrong on this stuff, and Herve
owns stocks and also owns real estate. Just like I own stock and I own real estate too. A
bit of both. And at the end of the day, it's good from an investment perspective to understand why
each of these is a good place for you to live and not live in only one or only the other.
Matt Faircloth: Don't forget, guys in the comment
section to write what you think about which one's better, which one's worse. Give us your opinions,
give us feedback, tell us we're full of it or anything we wrote up here. We'd love to hear your
feedback. Herve, give it up. Herve Francois:
Hey, man. Good stuff. Matt Faircloth:
Thanks for joining. [crosstalk 00:12:09] Market Hunter Thursday with Herve. Make sure you
guys check that out and make sure you like and subscribe to this channel. Thanks for watching
guys and have a great profitable week. Herve Francois:
Have a great profitable week. Matt Faircloth:
[inaudible 00:12:17] like this. Herve Francois:
That's not stocks. Matt Faircloth:
That was Herve's guy. I probably lost like $1,000 right there that are broke from Rock
'Em Sock 'Em Robots. Herve Francois:
Whatever you do, don't lose your head while investing.
Herve Francois: That's not stocks!
Matt Faircloth: That was Herve's guy [inaudible 00:12:29].