Is Real Estate Worth The Investment?

house key

Real estate or stocks – which can make you richer?

Asking this is like asking whether a Bentley or Benz is a better option for you. There isn’t one correct answer, because it comes down to your personality, preference and style. But with Toronto’s electric housing market, this decision may be a cornerstone for many in upcoming years. The financial benefit depends entirely on a number of factors. What you can do is consider all angles:

REAL ESTATE

STOCKS

PROS

  • Great place to live and raise a family
  • Has appreciated in price over the last 5 years
  • Real estate is often a more comfortable invest for populations who grew up exposed to it from parents
  • Investing in real estate means investing in something tangible
  • Diversification in real estate requires a substantial amount of up-front money
  • Your ownership of partial businesses through stocks allows you to benefit from company results without putting in much work
  • High-quality stocks increase their profits and cash dividends year after year (this means that every year that passes, you’ll receive bigger checks in the mail as the company’s earnings grows)
  • It’s much easier to diversify when you invest in stocks than when you invest in real estate. With some mutual funds, you can invest as little as $100 per month
  • Stocks are much more liquid than real estate investments. During regular market hours, you can sell your entire position, many times, in a matter of seconds.
  • Borrowing against stocks is a much easier process than real estate. If you are approved for margin borrowing, it’s as simple as writing a check against your account

CONS

  • Property taxes, furnishings, maintenance, improvements, insurance and mortgage interest all affect how much money is being made
  • Compared to stocks, investing in real estate takes many more management hours and hands-on work
  • Real estate liquidity can be very difficult- you may have to list it for months before finding a buyer
  • Recency and familial bias make buying a house feel like the most ‘comfortable’ option for young investors
  • It’s unlikely that the housing market will maintain its momentum, meaning stocks could add to their advantage in the upcoming years
  • In order to avoid being defrauded, one must ensure they trust their management and auditors
  • Despite their long-term benefit, most investors are too emotional to benefit (i.e. folding or selling everything during a crash, instead of staying calm)
  • Your stock prices may experience extreme fluctuations in the short-term

 

Sources:

http://bit.ly/2lGAHni

https://tgam.ca/1Ocw00v

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