BUILDING WEALTH: PIERRE’S TAKE ON STOCKS VS REAL ESTATE
It’s never been easy to decide where you should invest your hard-earned cash. There are so many options and the stock market has always been the go-to place to stash your cash and watch it grow. But, have you ever thought that there might be a better way to build serious wealth?
Let’s start with something simple: Do you own a home or condo? If you do, I encourage you to compare what you’ve earned on your property versus what you’ve earned in the stock market over the last 10 or 15 years. One of these things is not like the other, right? People, in general, and my clients, in particular, are starting to wake up and realize that investing in the stock market is earning you pennies in comparison to the dollars pouring in from your real estate investments.
INVESTING IN THE STOCK MARKET
Know when to fold them! Kenny Rogers was right about gambling and don’t be fooled, investing in the stock market is definitely a gamble. We all know the saying: the bigger the risk, the bigger the reward, but with this type of investment, you forgo any control you have over your money.
When you purchase stocks, you’re buying a very small portion of a publicly traded company and in return, you’re allowing the success or, worse yet, the failure of that company to determine what happens to the money you’ve invested. While there are lots of ways to try and make smart choices in the stock market, truth is: you just never know when something could take a turn for the worse.
Like…What if one of the companies you’ve invested in gets a new CEO and that news causes their stock to plummet? What if the shares of, let’s say, an airline you’ve invested in for years suddenly takes a dramatic dive due to an unforeseen controversy in the news? Fact is, these events are things you have zero control over. It’s a volatile market and when you invest your money in the stock market, you’re exposing yourself to a lot of risk.
INVESTING IN REAL ESTATE
Real estate is usually a very safe choice, when it comes to investing. Real estate is a tangible asset over which you have ultimate control. You can see it, drive by it, heck, you can even live in it. And guess what? You don’t have to worry about your house appearing on social media making a fool of itself and causing its value to go down.
The real estate market in Toronto has proven time and time again to produce far more steady growth and be more stable than the stock market. While economic and political factors can and do influence the market, it’s very rare to see property values drop significantly for the same reasons. But it is important to add and to remember that investing in real estate is a long-term proposition, so that even if the market takes a dip, given time, it always corrects itself.
The catch. In real estate, in order to start investing, you need to be prepared to invest money up front—more than you would have to before starting in the stock market. But, if you have the means, your dollar will go further when invested in real estate.
Real estate leverages your money in a way that the stock market just can’t compete with.
Shall we compare? Have a look at this:
Real estate has the ability to earn you ten times the amount that the stock market can because you are investing in a much larger asset.
And keep in mind: real estate just doesn’t go up unilaterally; you still need to make educated investment choices. That’s why it’s important to have the expertise of an experienced broker, who knows how to navigate the market properly and can help guide you to maximize your return.
Pierre’s real estate investment strategy will earn you the biggest rewards because he’s been in the industry for more than 10 years and has been investing for over 15. Before becoming an agent, Pierre taught himself everything he needed to know to turn a $6,000 tax return into 6 properties. He immersed himself in the complex nature of the real estate market and gained invaluable experience. Today, he uses his experience and expertise to guide his clients as they make smart investment choices that will earn them the most profit.
Your smartest move out of the gate will always be to work with an experienced broker. A broker with trusted and tested experience to ensure that you’re investing in a property that will help you to achieve the best financial results.
When buying a property as an investment, it is important to not make emotional decisions, and working with a broker gives you advantages, such as their skills in reading the market, recognizing what neighbourhoods are on the rise, and understanding which properties will earn you the top dollar.
KEYS TO SUCCESS
ENSURE YOU’RE FULLY FUNDED
Don’t over leverage yourself. A sure-fire way to make sure you don’t lose money in real estate is to ensure you’re fully funded. If you buy properties but don’t have the resources to hold on to them, you’re exposing yourself to an element of risk. Make sure you have all the money you need to hold on to that asset without needing to sell.
In addition to your monthly real estate payments (mortgage, property tax, and maintenance fees) it’s important to create a safety net. Financially speaking, even a house should be treated like a condo. With a home, it’s a good idea to have a “condo-fee savings plan” or as we like to call it, an “Oh Sh*t Fund”! You should put away the equivalent of 5% of your monthly mortgage as a safety net towards eventual repairs or unexpected events. With the average age of a home in Toronto resting at about 50+ years, you’re gonna need it.
HOLD ON TO YOUR ASSET
Don’t be in a position to sell because you have to. Your real estate decisions should be made in such a way that you never have to sell. Real estate is an investment, and you should never be making an investment with the assumption of having to sell it for a purpose. The only reason you should sell your property is if the profit from the sale is enough that the returns you gain from reinvesting it outweigh the returns from keeping the original asset.
Imagine if you were sitting on property you purchased 20 years ago—can you even imaging its value today? Holding on to your investment for 20 or 30 plus years will earn you huge returns with little risk.
CONSIDER THIS FIRST
If it were easy, everyone would do it. Some people might argue that investing in real estate comes with more responsibilities than throwing down money for stocks and bonds, but the truth is, whether you’re investing in real estate or the stock market, there will always be more to investing strategically than just putting down money, pulling up a lounge chair and sitting down to watch it grow.
Investing in the stock market, requires a lot of research on companies, market trends, and keeping on top of them (or your financial advisor) to ensure your money is safe and continues to grow.
Investing in real estate does require some hands-on responsibilities to maintain them, especially if you buy a house or an older property. And if you invest in pre-construction developments, you can put your money down, build equity over the 3- to 4-year build time, and eventually rent them out.
Regardless of your investment approach, you are going to have to put some work towards growing your wealth. After all, if getting rich were easy, everyone would be doing it.