Did you read the linked RBC write up?
The one you shared? The one showing the capital markets outperforming real estate markets over the short and long term?
The fact of the matter is investing in low fee funds is simpler administratively and from a cost perspective than owning real estate
Which is probably real estate funds are laggards…
The returns without leverage are almost identical. But with leverage, which is always the case, the returns are much higher in real estate.
“Total returns based on an initial $300,000 investment with no leverage in February 1999”
NO LEVERAGE.
I just googled Vancouver house price in 1990 (year I was born) vs 2024
($300k growth to $2m) 700%, not bad
SF shriller house pricing index went from about 40 to 360 over the same time frame -900% better
SP 500 ($400 to $5k) over 1,000% - the best
Look we’re both stubborn, so let’s just agree to disagree…
We are talking about houses. The only leverage you’re going to get is a bank loan
As for stocks you can buy calls and puts that actually amplify gains and losses
Explain this home ownership leverage you keep banging your chest about. Buy ten houses with bank loans? Buy a house that is 10x your annual salary?
… but I’m still right
think about it, your investment in real estate are the series of payments you’re making to pay back the mortgage. When you invest in stocks, you usually dont borrow money to do it.
If you put 300,000 in stocks, it’s not the same thing as borrowing 220,000 + 80,000 down payment + monthly mortgage payments. When you calculate return on investment, assuming the value of the home went up, the second investment (with leverage) tends to have higher returns.
Oh you’re talking about absolute return as a dollar amount and not percentage amount
That would be very difficult to make a mathematical comparison since you would likely make additional stock investments over that same period of time
For apples to apples comparison the best would be to take mortgage leverage (20% down or 26.66% in your example)
And apply similar leveraged to the stocks (UPRO which is 3x the sp500 but really should be 4-5x to be even more apples to apples)
So $80k down payment for a home in Vancouver vs $80k in UPRO
you borrow money to buy a house, interest rate is 3% per annum and the home price goes up 7% per annum. Say you purchase a home for 300,000, downpayment is 80,000, so you borrow 220,000. Home price is worth 600,000 after 10 years. You dont have to pay rent, which is around say 20,000 a year in vancouver or Toronto.
compare that to investing 300,000 in stocks, value is now 600,000 after 10 years.
Which investment has higher ROI? of course it’s the first one.
People dont buy stocks on leverage. That’s my point.
It’s easy to buy/sell calls and puts in the US, and there are leveraged ETFs for those who are too lazy to do that
Anyways since you brought up rent for completeness sake include property tax drag, maintenance, transaction fees
If real estate were as guaranteed as the broader capital market everyone would rush to liquidate their investment portfolios in favor of another house
I’m not arguing that real estate is a better investment going forward, I’m merely arguing that it has been for most people in vancouver and Toronto over the last 10-20 years primarily because they unknowingly use leverage, which is something they wouldn’t have done with their stock portfolio.
Alright, have to go, have a good evening.
The worst kind of troll.
Entering the No Fun Zone here.
Don’t feed the trolls.
The price you pay for a house is part financial investment and part spending to enhance your quality of life. To compare investment results with stock purchases which are 100% investment is questionable at best.
As an asset class real estate is a useful diversifier. Real estate assets are lower beta so we should not expect them to match stock returns. Like all investments individuals need to decide if real estate is for them.
This is irrelevant to many people. 90% take the standard deduction.
My mortgage interest is likely the lowest in this thread but was only $3,018.94 in 2023. The standard deduction is $29,200, and higher for my state taxes.
I get a partial deduction, which is probably true for much of that other 10% with SALT cap in place.
I wonder how much that’s been a factor in the rise of short term rentals since the 2017 tax law went in… seems that business ownership gets an upper hand on the tax benefits.
I wrote this for a reason.
Regardless of that nitpick, the main point is that mortgage interest is financially equivalent to rent. You pay someone else for the privilege of living in a home, and you never get it back. The principal is a savings device with some risk. Add maintenance to “rent,” add improvements to principal/savings.
Not as easy as getting a mortgage. Government supports mortgage loans (they support Fannie Mae which buys most mortgages) and they don’t support buying/selling calls and puts. Nor would I think anyone argue that for the average financially illiterate American, buying calls and puts is a great idea. (It’s like universal life insurance - if it takes more than a minute to explain a financial product, it’s a bad idea. I’m oversimplifying, but hopefully you get my point.) But many people argue that buying a house is a good idea for the average American, and I don’t think they’re that wrong, assuming a certain level of conscientiousness, credit history, and ability to make a decent living.
No, because it’s only your primary house that has all those advantages, not a secondary one.
I don’t think it’s that big a deal to admit that buying a house allows people to benefit from leverage whereas most other ways of leveraging yourself are much, much, much more risky for the average person (and probably for most people).