There is no question that investing in real estate is more reliable than the stock market, but it all comes down to whether you have the luxury of time and patience.
Let’s break down the numbers.
The Bank of Canada inflates currency by 2%, or slightly more, a year, which means that residential real estate investors can expect their properties to at least double in value in 25 years or less. In the last 15 years, however, property values in Vancouver increased more than four times in value, according to www.housepriceindex.com.
Assuming a 20% down payment on an investment property and a mortgage with an amortization of 25 years, the tenant will have paid off your mortgage in 25 years. The return on your down payment will be 5 times the amount you invested.
But then add in the increase in property value (at least double), and the return on your investment is 10 times your down payment.
For example, if your investment property costs $500,000 and you paid $100,000 down, the return will be at least $1 million after 25 years. How’s that for a retirement fund?
Now compare this scenario to investing in the stock market. No financial advisor will be able to guarantee that $100,000 can turn into $1 million after 25 years, it’s just not possible.
Investing in property is a reliable way to make money if you make an educated purchase and are willing to put in the time to see the land value increase.
If you’re considering purchasing an investment property, I’d love to sit down with you and walk you through the process, including sharing ways to make it lucrative in less than 25 years.