Real estate has always been used as a common way to invest for the future. Investors seek out land as a way to diversify their assets, earn income, and increase their net worth. Over the last 10 years the average home in the Lower Mainland has gone up roughly 85%. The important question isn’t whether or not real estate is a good investment, but instead we must ask what is the best way to use real estate to your advantage when investing?
We will compare the historic value of a detached home in North Burnaby on Fairlawn Drive purchased 10 years ago to the historic Value of Gold, Bitcoin, and the S&P 500 over the last 10 years.
Gold has outperformed Fairlawn by approx 5% as an investment and if you cashed out your Bitcoin to purchase Fairlawn in the fall of 2015 when it first launched, your lost Bitcoin would now be worth $35,534,620!
Detached home on Fairlawn Drive vs S&P 500
If you bought Fairlawn 10 years ago with a 20% down payment, how did your investment perform compared to the S&P 500?
2010 Purchase Price: $800,000
- Initial Investment: $160,000 (20% Down Payment)
2020 Sell Price: $1,490,000
- Initial Investment Performance (increase in value over 10 years): $690,000
- Expenses (interest, taxes, maintenance): $250,000
If you invested $160,0000 in the S&P 500 in July 2010, your profit today would be $400,000. In this scenario with a 20% down payment, Fairlawn has outperformed the S&P 500 as an investment by $40,000.
With a 50% down payment, the story is very different. If you invested $400,000 in the S&P 500 in July 2010, your profit today would be $1,000,000, which is far outperforming Fairlawn as an investment.
Over the last 10 years, getting a mortgage with less than 20% down payment to buy real estate would have resulted in a higher return on investment (ROI) than the S&P 500.
Breaking down the numbers further:
[pdf-embedder url=”https://www.garbuttdumas.ca/wp-content/uploads/2020/09/Book1.pdf” title=”Real Estate Good Investment Breakdown”]
Listen to The Garbutt and Dumas Podcast: Is Vancouver Real Estate a Good Investment? episode to hear a more in depth breakdown of the different types of investments mentioned above.
Do you have questions regarding investments in real estate, mortgages, and down payments? We would love to hear from you – contact us and we can help you with some of the specifics.