Real Estate vs. stocks

Oh isn’t this the million dollar question… or at least we hope it is.

Since you’re on my website, I assume you know what my preference is. But it’s not that simple. If you read my blog titled “Why your hustle will keep you poor” then you know I believe any type of accelerator is good.

In this situation, both are viable options to grow your wealth while preserving the most precious resource we have, say it with me, your time!

Stocks require basically no maintenance and it can be a lot of fun to buy and sell things. This is if you’re actually in control of your own portfolio. Most people just leave their money and future in the hands of an “expert”. Why the “"? well, most people give money to these experts with the hope that they can turn them into very wealthy people, but these experts still work 9-5 and will never be able to achieve for themselves what their clients hope they deliver for them. Isn’t that ironic?

Now, back to having fun with stocks. It’s always great when one of your preferred stocks jumps 20% overnight isn’t it? You made money while you were watching Netflix! But they can also go down just as fast, so my advice, don’t get too emotional. Investing in stocks is a long term game and not for the faint of heart.

Real estate on the other side requires maintenance and even a passive investment is much more active than buying and selling stocks. There are definitely headaches with tenants and ongoing maintenance costs and all the horror stories you hear. Real estate, just like stocks goes up and down, and both have historically increased over time. You can read many books and reports on it, but in Canada you can find enough evidence to show that stocks have typically outperformed real estate by a couple of percentage points.

So why do I love real estate?

The answer is simple, leverage and compounding. Oh those two magical words.

Say you have $100K to invest. You can buy $100K in stocks and say you get a great return of 10% in your first year. You made 10K, solid.

Now, say you grab that $100K and use it as a downpayment on a rental property. Since the downpayment is 20% for a rental, the house actual cost is $500K. Then the market goes up 8% (less than stocks), but since it is the whole house appreciating completely independent of your downpayment, the house is now worth $540K.

Last time I checked 40K >> 10K simple right?

But wait, there’s more!

If you selected the right type of rental property you also got paid every month… cashflow baby!

But wait, there’s even more!

You also paid down the debt on the house (with your tenant’s dollars). That money goes to your net-worth and if you want to you can actually have access to it monthly, tax-free. Yes, tax free. But we will leave those details for a podcast.

This is why I love real estate!

Disclaimer: I do own stocks and buy and sell them myself. I buy stocks from companies I use or admire and align with my vision and lifestyle. I use my investment account as my savings fund. Trust me, I am not keeping it in the bank. That’s the dumbest thing anyone can do. Hey, I just thought of another podcast or blog!

In the end, whatever you choose, make sure it aligns with your vision and passion, use accelerators and start creating your own dream life.

Mucho amor,

Abe