|
Real estate |
Real estate owned |
Stock Market |
|||||
| amount invested | 45000 | 45000 | 45000 | ||||
| property value | 80000 | 240000 ($80k each) | |||||
| properties owned | 1 | 3 | |||||
| rate of return | 13% | 17% | 11% | ||||
| appreciation | 3% | 3% | 0 | ||||
| rent increase/year | 3% | 3% | 0 | ||||
The above chart compares stock investments to two kinds of real estate investments: a cash purchase, and a property purchased with leverage. In each case we begin with a $45,000 investment. The stock purchase assumes the historical annual return of 11%. The cash real estate purchase assumes our nominal rate of return of 13% and a conservative 3% annual appreciation, and the leveraged real estate assumes a thirty percent down payment, which allows you to buy three of our properties. After twenty years your $45K has turned into more than $600,000 with leveraged real estate, compared to only $140K in the stock market.
