Stocks Vs Real Estate
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Stocks Vs Real Estate


Meet Samantha. She saved up some money and
used it to build wealth. She bought a residential house in 2010 for
$300,000 and rented it for $20,000 per year. Samantha, being the Real Estate maverick she
is, somehow managed to double the number of families occupying the residential asset,
increasing the rent by $10,000 per annum to $30,000, generating in the process an annual
10% return on her $300,000 original investment. As a result of the increase in rent, Samantha’s
house is now worth $400,000. Meet Christopher. He, too, saved up some funds
and started investing to generate new wealth. In 2010, Christopher decided to invest $300,000
and buy a piece of ownership in a Canadian company, called Constellation Software trading
for 38 Canadian dollars per one share. At the time Christopher made the investment
in Constellation Software, the company had little less than 21.2 million stocks outstanding,
with an annual profit of 41.7 million Canadian dollars – belonging to all shareholders holding
the stock. At the time, the largest shareholders in the company were the Founder and CEO and
a team of highly capable employees who have been doing very well for quite some years
before. By 2015, the very same 21.2 million company
stocks outstanding represents a part of an annual profit of 150.6 million Canadian dollars,
over 360% growth in after-tax profits. With that serious appreciation, the asset
– company stock – is bid up aggressively and now is trading at 531 Canadian dollars for
each stock – which is 1400% growth. What happened here? Well, in both cases, the underlying assets
grew their cash streams, which in turn, pushed up the price the next buyer was willing to
pay for the same asset. Understanding this well, Samantha is thinking
about increasing her cash flow from the residential house by renting the space under the kitchen
sink to some guy looking for storage space or opening a nuclear landfill in the backyard. Unfortunately, the two families crammed into
Samantha’s small home, demand Samantha fix the roof or else they will leave the apartment.
Now Samantha has to spend 15 grand on the roof and stop her plans of increasing her
cash flows. Her asset has reached its full appreciation scope. How about Christopher? Well, Christopher embarrassingly
does close to nothing – his asset is in very capable hands. Meanwhile, Samantha is drowning in expenses;
real estate agent costs, legal fees, escrow costs and any profits remaining end up in
the hands of the taxman with his 15% haircut, even though each and every rent payment has
been taxed in full like clockwork. Now Samantha needs to start the process all
over again, trying to find another transaction to keep the wealth generation process moving
on. Christopher’s life is quite different and
much better, relative to Samantha’s. Since Christopher’s asset keeps growing
and generates more cash, he doesn’t need to sell. As a result, the tax profits are NOT
collected and in itself keeps on working for Christopher, generating future profits that
are only taxed when Christopher decides to sell his asset. Unlike Samantha, who has to
pay taxes each time a transaction is completed, and this is what makes a huge difference between
them in the long-term.

13 Comments

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  • Danielle Adamson

    This is ridiculous! What about the fact that people don't pay cash for real estate. They can get financing. Also how can they not talk about depreciation with Real Estate. This is embarrassing!

  • LazyDog

    What about when the stock market crashes? Even if the housing market crashes the rent will stay the same. You also forgot to mention that stocks bring in an average 6-8% per year while houses can bring in up to 20% if you flip or You can have the steady cash stream from the rentals. plus she should have looked at the roof with a professional inspector before buying the house.

  • telolisou

    Pathetic movie in so many ways that I would rather not spend more time on this, other than the waste of 4 min watching it.

  • skaznguy Na

    I do both real estate and stock investing, and this is complete bias toward stocks.Both have great upsides, both have risks. I'm sure this guys will have responses for any arguments, but I could easily do the same for real estate.  Either way, don't do either if you don't know what you are doing!!But do your research, most wealthy people get into real estate, even if their money came from stocks.Once you understand the strategy of getting other people's money to earn you money.  Stocks, you typically need to save up the money first.

  • Christopher Martin

    Ummmm does the person who made this video understand investing? Any formal education or experience in real estate and stock market investing? To anyone watching, THIS IS NOT HOW IT HAPPENS!! LOL

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