Stocks vs Real Estate (when rent is dirt cheap)

3 Replies

Hello BP investors,

I have a brain scratcher for everyone.

My spouse and I are confused if you should buy our first property (duplex) and become owners instead of renters OR continue renting and increase our stock portfolio.

Key points to consider:

  • We live in a small city and our rent is super cheap ($400 per person)
  • Hence, we are able to save or invest 60% of our monthly income into RRSP and TFSA (Canadian tax-free accounts). We buy etf's/index funds in them (6-12% average return every year)
  • We are not savvy real estate investors. I have read some books and listened to 100s of podcasts and know the concepts.
  • BUT, calculating the better way to grow our wealth is unclear. WHY? If we buy a property, we won't be able to save or invest 60% of our incomes. It would reduce to 20-30%.

Hence, is it still a vice decision to buy a duplex and house hack?

What do you think?

House hack all day long. I love buying stocks but I really love owning real estate. Yes the s and p has returned 10% every year over the course of its life but that is MUCH different than returning 10% each year. There have been periods of 20 years with 0 return. Keep that in mind 

Be careful when comparing stocks to real estate because you have to factor in leverage. Unless you're a margin investor (which you cannot do in registered accounts), you are always paying 100% of your cash for your investments. If you're in a market that has appreciation, it can easily provide a return better than stocks but there's an obvious risk when buying and hoping for appreciation. I buy for cash flow and typically shoot for 15+% which is better than most stock investment. 

Do you research but don't compare "apples to oranges" because the details matter.