Real Estate Investments outperform stock market

Saw this article in the Financial Post over the weekend…  great stats about timing real estate investment…  There is a growing fear that interest rates will rise causing affordability to decline… Okay, for now, let’s say that we do except that the global and US economies will suddenly improve  and govts can then raise rates…. Should this stop you from buying real estate?   Is this a bad time to invest?

According to the stats in this article, the answer is NO.   From 1992 to 2011, the average house in GTA increased from $214k to $465k.  That’s 116% increase or a compounded annual return of 3.94%   But if you factor in just enough rental income to cover your costs, then your return jumps to 11.40%…. compared with the TSX index return of 8.69%.   And hey, we didn’t factor in any rent increases…rents have also climbed dramatically over the past 20 yrs…

But what if you bought during the peak of 1990, just before prices dropped….  well, your return would still outperform the TSX index with a 8.94% annualized return.    And now let’s really think about this for one second…. How many people out there have actually invested in the TSX index?   I mean, come on…  No stock broker or Investment Advisor I know has ever recommended that.. they never do.. they pick mutual funds, stocks, etc…  and guess what?  I’ve yet to hear from anyone out there that has made a good return in the last 20 yrs…  In fact, most people I hear from tell me they have lost or just broken even…

Now, combine this info with the fact that we are still enjoying RECORD LOW interest rates and it’s very easy for me to say, I’d rather buy property than ride the stock market roller coaster…

There are some things to consider before buying that rental property…  how long should you plan to buy and hold?  What are the possible negatives?  Can you deal with tenants?   etc… but this is just some fact-finding… the knowledge is out there… it really isn’t that hard to do… you just need to ask questions and get informed.. it is possible..   If you need some advice on buying rental properties, send me a note and I’ll be happy to share my advice and strategies.

EVEN AMANDA LANG……?

One more thought… I was watching Amanda Lang on CBC a few weeks ago… she’s well spoken and very bright… but I have to take exception with one of her comments….  It was during a round table discussion… I only caught a bit of it but she made reference to real estate not matching inflation over the long-term… she was advocating other options for us to invest….  Come on Amanda, really?   Do you want to take  poll and see how many people have lost money in stocks and mutual funds??    And then let’s compare with how many have made or lost with real estate?

I don’t know about you, but my stock and mutual fund performance has been an on-going roller coaster ride with my Financial Advisors giving me the same speech for 24 years.. you know the speech… it’s from the movie, the Boiler Room with Ben Affleck, Vin Diesel and Giovanni Ribisi…   “don’t sell when it’s low…buy more, this stock is gonna come back….”  Last I checked, the most wealthiest people made their fortunes in real estate….   Sorry Amanda, I can’t agree with you on this one…

2 Responses to “Real Estate Investments outperform stock market”

  1. srav Says:

    Can you send me your stratergy & tipes for buying investment/rental property?

    • Steve Garganis Says:

      Hi Srav,

      The strategy depends on your own personal goals and situation, etc.. but generally, i like to take a fixed rate mortgage to match the fixed rental income.. i usually go long term, especially today with rates being so low… 5 yr fixed… when it comes to property selection, I don’t get too involved.. I would suggest you speak with your realtor or I could recommend a good one… I like townhouses… they have low maintenance, rents are usually higher… prices down fluctuate as much… condos and multi-unit dwellings don’t appeal to me, except larger multi-unit dwellings like 4plex and higher… there are also some good financing strategies available that can make your cashflow better…

      Contact me and I’ll share these with you….

      Steve


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