In this article we are going to compare traditional forms of investing vs. real estate investing. You will see the advantages real estate investing has when you break down the numbers.
For both examples we will use $10,000 available to invest.
Traditional Investing: Savings account @ 3% annual return. $10,000 x 3% = $300.
CD @ 4% - 6% annual return. $10,000 x 4%/6% = $400 - $600.
Mutual Fund @ 7% - 12% annual return. $10,000 x 7%/12% = $700 - $1200.
Stocks @ 12% - 20% annual return. $10,000 x 12%/20% = $1200 - $2000.
You want to buy $200,000 worth of stock. A bank will never finance $190,000 for you to invest in stocks because there is no guarantee in them.
Real Estate Investing: Take the same $10,000 and go to your bank. A bank will finance all day long as opposed to stocks because the house is collateral for the bank. If you recall in the last article, if the home is destroyed, there is insurance and value in the land.
Purchase price: $200,000
Down Payment: $10,000
Finance: $190,000
Annual Appreciation 6.3% (national average)
1st year profit = $12,680. This equates to a 127% return on your investment. You will not see a return like that in the stock market. Even if the house appreciated 2% on $200,000, your return is still higher than a well performing stock at a 20% return.
What if you purchased 10? What if you were educated to buy homes no money down with equity already built in? There are ways to invest in real estate without using your cash or credit to purchase these types of properties.
In my next article we will discuss building a foundation to start your business.
Happy Investing!
Tony
