Now that wee see a bigger supply of houses in GTA area for the first time since 2007-2008 it's possible that some dynamics of real estate are changing but if it's just a small bump or a bigger bubble burst remains to be seen.
You'll do ok.
Originally Posted by Chris L
Rusty said" I know lot's of guys who love the stock market and almost without exception they lost money" Well the guys you know must be a small sample because I've invested in real estate and the stock market and while each has it's ups and downs, I've made more in the stock market than in real estate.
i always compare my first stock purchase (TD in Sept/97 at a split adjusted price of $21) to my oldest real estate purchase that I still own(cottage purchased for $400k in April/97 now worth a little over $1million) Made a lot more on TD over this period. Certainly not representative but maybe more verifiable than the anecdotes we usually hear.
Latest quote on TD, $82. So you have a profit of $61 per share. If you invested $100,000 it has turned into $390,476.
If you bought your cottage for 25% down with a 75% mortgage, which is conservative, your $100,000 down payment has turned into $700,000 equity.
You had the use of the cottage all these years, priceless memories with your family, and it has cost you nothing. You even end up with a profit on the deal.
And you weren't even trying to make money.You bought some real estate with no thought of making money, and you still did better than the best stock investment you ever made.
Is it any wonder I love real estate?
Last edited by Rusty O'Toole; 2012-09-19 at 12:53 PM.
Rusty. What you love is debt. I have none. My TD is up almost 400% while the real estate is up about 275% I bought much more TD then you modelled. Actually the cottage has cost plenty over the years. Maybe $40,000 per year. Agree about the memories though.
Last edited by Square Root; 2012-09-19 at 07:16 PM.
There is also growing dividends in the case of TD.
It's got to be one of the best dividend payers in the Canadian market.
Regarding leverage, there is no reason why the same leverage cannot be applied for stock purchases as for RE.
In fact, RE can usually not be 100% leveraged, but stock purchases can be (theoretically) by borrowing against an unsecured LOC.
One of the main reasons, the perceived risk appears lower in the case of RE is because your house is not traded on an open exchange with millions of bidders offering and asking values every millisecond all day and all year round.
Also, the business cycles for RE are far longer than equity or interest rate cycles.
But that does not mean that an individual investor cannot get caught wrong footed during the cycle.
Unlike an equity investor, if you happened to buy at the top of the market, you may have to wait a decade (or two) instead of an year or two to recover your losses.
Latest numbers aren't looking too hot : http://www.thestar.com/business/arti...-year-and-next
Should be interesting to see what plays out in the next 3-5 years, especially if Carney decides to hike rates in 2014-2015. Spoke to a realtor here in Montreal, told me a lot of deals have fallen through since the provincial election, maybe it isn't so 'different' here in Canada after all...
Good post Harold. I would have said the same thing if I hadn't been in an airport
Yes, with the TD example above. The dividends would really make a huge difference as well, on top of the share price appreciation, or accumulation of further dripped shares.
(and Rusty he didn't say it was his best investments, just his first stock purchase-although b/c of the timing of both it does make for an interesting comparison)
A cottage buyer would also have to be aware of the maintenance expenses as mentioned above as well as (assuming it were financed as above over 25 years, even though I know SR said it was paid in cash) there would be approx 200,000 mortgage interest to be paid out of pocket on top of the original $300,000 mortgage. I know it would be a different consideration for a rental property, but a personal usage cottage doesn't make for the same financial investment. I think in general cottages would be more of a family investment passed on to the next generation.
I think in Canada we are beginning to see how liquid some of our RE is.
@Cal. Totally Agree. Don't get me wrong we love our cottage and our other personal use real etate(4 places) but don't view them as investments, good or oherwise. My dividends come in pretty handy to pay the real estate costs. Real estate for investment purposes is different in that any leverage can work to your advantage. In my case the work involved is too much. To each their own though. I react negatively when someone says a sweeping generality such as "I know lots of guys who invested in the stock market and they all lost money". A bit like " real estate is the world's best investment because they aren't making any more" As if.