Regardless of the state of Canada’s economy, global markets, or the stock market, protecting your net worth can be a wise course of action. In this Frank Leo Net Worth tips article we’ll cover how Toronto & GTA Real Estate can not only protect your wealth from shrinking and protect from inflation, but even generate more income.
Please note that while Frank Leo & Associates are the #1 RE/MAX Team in Canada* lead by the #1 Individual RE/MAX Agent in the World**, we are experts in the field of Toronto & GTA Real Estate, not finance. This article should not be taken as financial advise or replace the need to see a financial advisor.
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Investing in Toronto Real Estate – as opposed to stocks or bonds – can be a way to protect your net worth from inflation.
Stocks, bonds, and other equity investments can decrease in value when inflation sets in. That means your net worth also decreases and your buying power goes down.
Real Estate is one of the select few assets which stays proportional to inflation. As inflation sets in landlords increase rents and property values typically go up with them.
As an example we can look at how inflation affected residential house prices in Texas between 1979 and 1985. The Texas home prices index rose from 100 to 175.8 in that time. In practical terms, that means every $100 invested in a residential real estate asset in 1979 would was worth $175.8 just 6 years later.
The Huston consumer price index also jumped from 100 to 142.9 over that same period. The difference between the two figures (32.9%) represents the increase in the purchasing power of each $100 invested in Texas residential real estate.
If you have any further questions regarding real estate investment in Toronto & The GTA the Frank Leo Team would be happy to answer your questions. Contact us with your questions today.
Residential real estate is a unique investment because it’s an assets which can actually fulfill people’s basic needs.
Unlike luxury commodities like gold, or intangible wealth like equity, a house is a type of necessity. It can fulfill a need, not just satisfy a desire. It will always have that tangible value.
Although no one can say where the market will go with certainty, it is reasonable to conclude that residential real estate will always have value because people will always want to own nice accommodations.
Long term, real estate can be better overall for your net worth than equity assets. You may be wondering how that is if real estate appreciation (even if you added potential rental income) underperforms the appreciation of stocks plus the dividend income they provide.
If we look at all the variables and see the investment in context, we’ll begin to see how real estate can be a better deal.
Let’s compare taking out a mortgage and leveraging money from a stock broker as two types of investments. The better these investments, the more secure your net worth.
For many people, investing in real estate turns out to be the superior investment. For one, borrowing money to buy a house in Toronto comes at relatively low interest rates. Let’s say you buy a house in Toronto for $1,000,000 and make a standard 20% down payment. Your return will be 15%, assuming the property appreciates at 3%.
Generally, these figures are better than what one could expect to make from equity investment as a non-professional trader.
When you buy a house in Toronto & The GTA, the investment belongs to you. Although you may owe money to the bank in the form of a mortgage, the property is yours and that means you can do what you want with it. You choose when to sell.
With a stock you could be forced to sell at an inopportune time. Selling at the wrong time could cut in or completely undercut your margins.
Just like other financial assets, your Toronto & GTA real estate can help you build net worth in addition to protecting it. As outline above, it could even be a higher return than the typical 2% which many bonds and stocks yield.
Unlike equity, you don’t have to sell your property to turn a profit. As a landlord you can make up to double-digit returns on your investment.
Do you have further questions about real estate investment in Toronto & The GTA?
Whether you’re thinking of buying or selling your property in Toronto an the GTA, you can count on the #1 RE/MAX Team in Canada* led by the #1 Individual RE/MAX in the World** to deliver insights and answers.
We’ve been serving Toronto & The GTA by buying and selling real estate for nearly 30 years and over that time we’ve developed a sharp understanding of the market and found the answers to the questions our clients are asking.
Contact us to have your real estate questions answered.
* For Dollar Volume January – May 2018
** Dollar Volume 2017