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Discussion Starter #1
Stock investors always say real estate doesn't pay like stocks. Maybe that is true in some experiments of the past and is true in the US today. Bottom line is rent goes in that toilet and gets flushed every month. Living is a expense every month that renters pay in todays price and owners pay at the day they buy. Owners get the advantage that dividend stock owners receive at the day they buy.

Stock investors mistakenly assume they have won and real estate only appreciates at some lower return while they continue to throw rent in the toilet. This is all true if the real estate owner is an idiot and leveraged to the hilt on their own residence and can't afford even a 1 percent increase in mortgage rates.

In the end stock investors start from zero and will lose or gain from there. The real estate owner gets to increase equity as they go while the stock owner puts rent in the toilet.
 

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How about both?

A sweet portfolio & paid off modest house?

If you stop buying the crap that your personal residence is an investment rather than an expense and buy something that's just a house rather than some kind of p#nis extension or social status certificate, I'm sure you can make out ok :)
 

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Long term capital appreciation is about 2.5 percent. Nothing to write home about. Depending on the price/rent ratio, it might make more sense to buy than rent, but at current housing prices, it seems doubtful.
 

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Stock investors always say real estate doesn't pay like stocks. Maybe that is true in some experiments of the past and is true in the US today. Bottom line is rent goes in that toilet and gets flushed every month. Living is a expense every month that renters pay in todays price and owners pay at the day they buy. Owners get the advantage that dividend stock owners receive at the day they buy.

Stock investors mistakenly assume they have won and real estate only appreciates at some lower return while they continue to throw rent in the toilet. This is all true if the real estate owner is an idiot and leveraged to the hilt on their own residence and can't afford even a 1 percent increase in mortgage rates.

In the end stock investors start from zero and will lose or gain from there. The real estate owner gets to increase equity as they go while the stock owner puts rent in the toilet.
That's only true if owners pay a reasonable price for their home. It seems to me that owners today are stretching their finances thin to buy that home.

I don't believe this has to be an either or decision. You can choose to buy a modest home with a comfortably affordable mortgage and also start building a portfolio. In fact, I'm convinced you have to do both. You need a home to live in and you need a portfolio to help cover your expenses.
 

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You can choose to buy a modest home with a comfortably affordable mortgage and also start building a portfolio. In fact, I'm convinced you have to do both. You need a home to live in and you need a portfolio to help cover your expenses.
Ding ding ding ding ding! This post gets the winning bell from me.

A corollary is that if housing is not reasonably priced (i.e., buying means that you are unable to build a separate pool of wealth in addition to paying your mortgage down), you should not buy. :)
 

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I would also add that I throw more than twice as much money into the toilet every month in the form of interest on the mortgage on our three-bedroom house than I threw away in rent each month when we were renting a three-bedroom apartment. An apartment vs. a house is not an apples-to-apples comparison, but it's a real-life comparison. Most people who "graduate" from renting to owning don't look for a new dwelling that's the same size as the one they were renting; they usually want something bigger and better.

But anyway, yes, both is the way to go.
 

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Stock investors always say real estate doesn't pay like stocks. Maybe that is true in some experiments of the past and is true in the US today. Bottom line is rent goes in that toilet and gets flushed every month. Living is a expense every month that renters pay in todays price and owners pay at the day they buy. Owners get the advantage that dividend stock owners receive at the day they buy.

Stock investors mistakenly assume they have won and real estate only appreciates at some lower return while they continue to throw rent in the toilet. This is all true if the real estate owner is an idiot and leveraged to the hilt on their own residence and can't afford even a 1 percent increase in mortgage rates.

In the end stock investors start from zero and will lose or gain from there. The real estate owner gets to increase equity as they go while the stock owner puts rent in the toilet.
Convincing, cogent "analysis" here, folks. Renting always = money down toilet. Buying always = a good investment. Now I finally understand.

P.S. Where do you think all that interest you pay goes to? Answer: Toilet paper.
 

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Buying a house is a lifestyle choice not an investment. Owning a house has more expenses IMO but the lifestyle is better. Buying a 2nd investment property is the question, and since I'm already overweight in RE why buy another one when stocks return more for less work. Have you replaced a roof yet?
 

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Discussion Starter #9
Canadian capitalist is quite right, but stock investors often try to make their losing arguments and rent.

As long as you buy in a good area and follow the 25 year, 33% of gross earnings and also allow for interest rate increases you will probably destroy stock investors. If you buy your principal residence using every means possible to shoe horn in you probably will end up in trouble unless you are confident of salary increases in the future.
 

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Newest development in town, 12% of gross, down to 17 years I think. I still think maintenance is expensive and time consuming. A lot of up keep expenses is flushed down the toilet other than having a nice place to live. When you subtract the expenses and work from the RE appreciation those effortless dividends look nice
 

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Canadian capitalist is quite right, but stock investors often try to make their losing arguments and rent.

As long as you buy in a good area and follow the 25 year, 33% of gross earnings and also allow for interest rate increases you will probably destroy stock investors. If you buy your principal residence using every means possible to shoe horn in you probably will end up in trouble unless you are confident of salary increases in the future.
Too many people have bought too much house. Carrying costs have been too low in recent years, and unfortunately, I don't think some homeowners really know that they have bit off more than they can chew.
 

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... while the stock owner puts rent in the toilet.
...
As long as you buy in a good area and follow the 25 year, 33% of gross earnings and also allow for interest rate increases you will probably destroy stock investors. ...
Is this a realtor talking?

Ownership is a lifestyle expense. Any capital appreciation after home maintenance, and interest expense is a lucky fluke of leverage.
 
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Well wait a minute ... isn't the question which pays better ... investment in equities or investment in real estate ... "Stock investors always say real estate doesn't pay like stocks" ... nothing to do with home ownership.

So, which is the better investment?
 

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Discussion Starter #15
All things being equal stock investors usually do not do nearly as well as real estate investors whether it is your principal residence or as a landlord. Sure enough you buy at the wrong time, do stupid things in both stocks and real estate you will not do well.

That said real estate is not manipulated like the stock market and the land is still there and the stocks can easily disappear. Of course you can point to the US who did manipulate the real estate market but that was easily seen by the no interest or 35 year plus mortgages, teaser rates and all that garbage. Canada I am sure was on to that path as well but luckily we did not get that far.

But overall if you ask an accountant who does better from what they see and it would not even be close. The real estate investors would have done far better by a mile. But still the stock investors try to cling to their dividends and so on pretending they are rich, but really it is what they put into the market that makes them rich.
 

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Seems like a pointless discussion. Anecdotal evidence rather than historical returns...

I'll agree that most retail investors who invest in the stock market are their own worst enemy. They buy high and sell low, do not diversify, etc. and their returns tend to lag the index by miles. But this is just like people who buy too much house, or pay too much for a property in a bidding war, etc.
 

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The problem with real estate is that every market is different and when you jump from market to market, you can not guarantee the results. As an anecdotal example, I moved this year and was able to make some money on my house (Quebec). Another co-worker also moved this year, but from Edmonton and is looking at a $50+K loss. Now, can you say that he was stupid because the job dictacted that he move and has to take a loss? I would say that with that kind of loss, he might as well have been renting if he could find an equivalent dwelling. Work will probably dictate that I move again in a few years, and given the current market, I'll be happy to break even.

All that said, when you're talking about your principal residence, you really can not equate it to an investment because it is a lifestyle choice. As for manipulating the real estate market, I'd say low interest rates and growth spurts (in Edmonton, Calgary), can do it on its own. And that is not including schemes to have 'straw buyers' purchase houses: http://www.cbc.ca/money/story/2010/05/06/mortgage-straw-buyer.html
 

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Also I believe that people who cling to the notion of real estate being a good investment have not moved extensively. When you have bought and sold in Alberta over different decades, you can no longer cling to the fallacy that RE always goes up.

I had a colleague who was transferred from Vancouver to Toronto in 1984. He had to buy at a comparable price to preserve his RE equity. So he bought in The Bridle Path. As a 20-something living there, he was miserable because all his neighbours lived a different lifestyle.

Eight years later, he was transferred back to Vancouver and could not afford to buy in his former neighbourhood. Now he can retire but keeps working to enable him to continue to live in his expensive RE. To him, downsizing is an indication of financial failure.
 

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But overall if you ask an accountant who does better from what they see and it would not even be close. The real estate investors would have done far better by a mile.
Can anyone recall what percentage of self made millionaires in the book "millionaire next door" owned their house, rather than rent?
 

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All things being equal stock investors usually do not do nearly as well as real estate investors whether it is your principal residence or as a landlord. Sure enough you buy at the wrong time, do stupid things in both stocks and real estate you will not do well.
During the recent RE boom you mean?

That said real estate is not manipulated like the stock market and the land is still there and the stocks can easily disappear. Of course you can point to the US who did manipulate the real estate market but that was easily seen by the no interest or 35 year plus mortgages, teaser rates and all that garbage. Canada I am sure was on to that path as well but luckily we did not get that far.
I think stocks are more efficient than RE. All stock investors are investing.. lots of home owners are just owning a home. Lots of buyers pay more than they should which makes the RE boom

But overall if you ask an accountant who does better from what they see and it would not even be close. The real estate investors would have done far better by a mile. But still the stock investors try to cling to their dividends and so on pretending they are rich, but really it is what they put into the market that makes them rich.
Of course they have done better during the recent RE boom. If I decided not to buy stocks and just invest in RE only, I would be investing 100% into 1 market and hoping it will boom again
 
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