With stocks, if you have $100,000 to invest you can buy $100,000 in stocks. If you earn a 5% return per year, in 5 years the (compounded) value would be $128,000. However, putting 10% down and financing the balance you could purchase $500,000 in real estate. The (compounded) value of the $500,000 (minus the cost of money at 6% over a 30 year fully amortized loan) would be approximately $641,000. See right for how I calculated this. Note that the way I calculated this is far too simplified and anyone with knowledge of accounting would not like my approach. However, the difference ($28,000 gain from a stock vs. over $500,000 gain with real estate) is so large that errors in my assumptions are not all that relevant. Plus, I did not assume any rental income!
Note than while leverage is a powerful investment tool, it is a double edged blade. It can help or hurt you. Variable rate loans and over financing of investment properties can be deadly as evidenced by the current international situation. However, used intelligently, financing can enable you to leverage your investment dollar for a far higher rate of return.
Part of your investment team should be someone who knows your tax situation and can advise what steps to take. These days taxes can have a huge impact on whether an investment makes sense or if it is a terrible idea. I have no knowledge of taxes and can not advise you in this area.
Real estate has unique advantages over any other investment vehicle I know. Below are the top four categories:
Contact me if you are considering buying or selling Las Vegas real estate. You will be glad you did.
...Eric
Eric Fernwood
RE/MAX CENTRAL
8400 W. Sahara Ave
Las Vegas NV 89117
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