Video Overview:

Real estate vs. stock market which is better to invest in? Truth is both are good and to get a good return on your investment it is important to work with someone that understands and has a good track record of getting good returns on investment whether that be in real estate or the stock market or you need to understand it yourself. In this video my good friend Edward Kirch is going to give his breakdown on the type of returns you can expect whether investing in the stock market or real estate and our hope in doing so is that it will help you decide where you would like to start investing.

Video Summary:

So, let’s assume that you have a $100K to invest, it could be money from your 401K or just savings. And let’s say you would like to invest that money in the stock market, the first thing I would like you to do is go to your banker and ask if you would get an additional $400K, so you can get a total of $500K worth of stocks. What do you think your banker is going to say? No, they are going to tell you that is too risky! Next go to your financial advisor and ask them whether they think you should invest your money into stocks or real estate, what do you think they are going to say? Stocks! Why, because they make a commission when you do that, so it may not be that they really believe that investing in real estate is risky it is just that they have a financial incentive in advising you to invest in stocks. So it is important to do your own research to determine the type of investing that is right for you.

So with stocks let’s assume you pick a stock and you get really lucky and a lot of the time it is all luck unless you invest in stocks full time and do 40 hours a week in research on the stock market, which most people don’t do. So let’s assume you put that $100K into the stock market and get a 10% return. A 10% return is really good return for stocks that would mean you would get about $10K return on the $100K without doing much work. But out of that $10K return if you are in the 30% tax bracket $3K would go to taxes, so you are left with $7K.

Now let’s assume you decided to invest that $100K into real estate, so you find a property for $500K, you can put 20% down which is the $100K that you have and the bank will finance the remaining $400K because the bank likes real estate and it is a safe investment for them. So let’s say they give you that $400K loan for 5%, that means you would have to pay $20K in interest that year on that loan, but how will you pay for that interest?? Let’s assume that building you just got has a 8% CAP rate, that means you are getting $40K a year return on your investment after all expenses. In those expenses mortgage interest is not included therefore $40K-$20K=$20K Net profit! $18K of that $20K you can take off of your taxes for depreciation on the property, and with inflation this property is going to appreciate 2%/year which means an additional $10K per year in equity!!

Now, let’s assume another deal, let’s say you put together a deal with owner financing and only put 10% down on the property that means you get a property for $1M put your $100K as down payment with this type of leverage assuming you still have your 8% CAP rate, that is a $80K a year return on investment. But you have a loan for $900K say for 5% again that means you will have to pay $45K a year in interest, so you will walk away with $35K in cash flow and most of it will be a tax write off to depreciation on the property and if we account for inflation again with the 2% in appreciation that is an additional $20K a year in equity. That is over 50% return a year on your investment of a $100K on this deal. The biggest reason why Ed and I are focusing on investing in real estate is because of leverage. In these examples you are able to make 3-4% in interest on the banks money, do it enough times and you start generating a lot of cash flow along with the tax deductions and appreciation!!

👇SUBSCRIBE TO ED’S YOUTUBE CHANNEL HERE 👇
   / @edwardkirch2140  

★☆★ For Real Estate Investing Courses - Please email me at [email protected] for more information.★☆★

★☆★ CONNECT WITH ME ON SOCIAL MEDIA ★☆★

Facebook:   / laura-pitko-1464576883611081  
Instagram:   / laura_pitko  

DISCLAIMER: I (Laura Pitkute) am not a financial advisor, real estate broker, a licensed mortgage broker, not a certified financial planner, not a licensed attorney, and not a certified public accountant, therefore please consult with a competent professional prior to engaging in any investment deals.