Investing vs Real-Estate

Should you invest in the stock market or should you invest your money into real-state? While this is two of the three ways to build wealth, building a business being number 3.
First, let me say I believe you should do all 3. If you have ever heard someone say, “Don’t put all your eggs into one basket”. The reason for that is all three strategies have good and bad parts. You always want to have a backup plan just in case one plan has a crazy “I didn’t see that happening” outcome.
So, why would I compare investing to real-estate? Well, let me start off by saying I’m comparing Long-Term Investing to Buy and Hold Real-Estate. It’s important to compare Iapples to apples. If I was a trader I would be comparing trading to fix and flip real-estate.
You want to invest in the stock market or real-estate because both of these strategies will help you to have money you can live off of, without working for it. Wouldn’t that be nice? Money that comes in without working for it.
So, here are two examples that can help you to figure out what strategy you would like to start first.
If you look in a good rental area for real-estate you can find a property for $250,000. I have looked on apps like Redfin to see what other properties are renting for in the same area. What I have found is rent for around $2000 a month. This is about .08% of the purchase price.
You will have to put down 20%($50,000) to purchase the home. After paying for mortgage, taxes, insurance, H.O.A. and insurance for appliances. You might be left with $100 to $200 a month. This is with a 20 year mortgage. So, the real come up won’t happen until the mortgage is paid off and you get to pocket the majority of the $2000 a month. Don’t forget once the property is paid for you still have to pay for insurance on the property, insurance for appliances, H.O.A. and taxes.
This means over the years rent should go up and you should be able to pocket at least $1,500 per month after twenty years. Buy a few properties and your personal expenses will be paid for without working.
Take that same $50,000 and put it into the S&P 500 mutual fund. By historical data it has gotten investors a 10% return. The S&P 500 started in 1926. It’s a basket of stocks. It has the top 500 companies in the US in one fund. When you put in a $1, that dollar gets split between 500 different companies. This is not a new investment. Which means it has history and they can track its past performance. In 20 years that $50,000 investment will turn into $366,402 without adding anything to it. It will continue to produce 10% returns every year. You will pull out your return money and live off of it.
Which means, every year with a 10% return, you will make $36,640. That’s $3,053 per month.
Now, I have not mentioned the pro’s and con’s to both real-estate or investing. Trust me each side has good and bad. However, what I wanted you to see is the math. Both are good and I would suggest for you to do both.
Looking for a class to learn more about investing. I have a course called INVESTING 101. I created it so you could learn how to invest and live off your investments.