Guest Post: ‘Real estate vs stocks. Why I chose real estate’ 

The first time I ever thought about investing was as a young teenager, I was 15 years old browsing through the bookshelf at my local library

 By Entrepreneurs Tutor 

I had been walking through the business section on my way to check out the sports section, when a blue book with gold font caught my eye. It was from a property investor who had amassed a property portfolio of over 130 properties. I stopped and had a skim through the book. 

After 5 minutes of distraction as I read small parts of the book, I realised I had to buy this, I didn’t even go to the sports section. I just bought the book and took it home and got to reading. 

And that right there I realise was my first and my best investment. $16.99 is what I paid, and I can tell you now it was the best money I have ever spent. 

I finished the book within the week, and went to tell my father about it, my father had made his money from stocks and not property and told me I should invest in stocks and not real estate. 

Real estate Vs Stocks 

 
So, I spent the next 2 months researching both real estate and stocks, finding every book and every bit of content online to help me choose what I would work toward. I came up with the conclusion that real estate was where I should be putting my money. 
 

Why I chose real estate

 
I did all the numbers, and realised as an inexperienced teenager I was very unlikely to beat the S&P500 index of around 8-12% annually, the main reason I chose to go with property was the leverage that it offered, If I was to pay a 20% deposit on a property, I would get growth on the total value of the property. 

After doing the numbers I realised If I was to get the same return on my unleveraged money in the stock market as I can in real estate, I would need a 30% return, and that is just in the first year. 

Let me explain, If I was to put a 20% deposit on a $300,000 house, which is $60,000 and I get a decent return of 6%. That property would now be worth $318,000. And because I have made a return on my leveraged money ($60,000 deposit), I would have now got a 30% return on my money. 

I knew that I would not even be able to get close to this in the stock market, I also knew that there was higher entry costs and taxes etc associated with getting into real estate. 

But I was thinking long term, I was going to be holding these properties for a long term and eventually they would give me a very decent cashflow once I had paid down enough of the debt. 

I also knew that researching real estate was a lot more interesting to me and also a lot easier to understand, I didn’t have an MBA and I wasn’t planning on getting one. I had lived in a house my whole life which must have helped make the idea of investing in real estate a lot less daunting. 

I made my first purchase at 21 and have been steadily purchasing single homes ever since. They have provided great growth, averaging much better than 6%, and have been providing me with a decent cash flow.