I often hear people say that they feel more comfortable investing in the stock market or keeping their money in a bank account. To them, this choice feels safer and more reliable. But this is a myth. I believe that they say this because they have not done the work of comparing how money grows in different investments. So I’ve broken it down for you.
Let’s say you start with $50,000. Now if you put that money in a bank account, where it compounds at 1% interest, after 20 years you will have made a profit of $11,009.50.
Now let’s say you want to invest that money and you choose to invest that $50,000 in the stock market, which averages a 7% annual return on investment. So after 20 years compounding at 7% you will make a profit of $143,484.
Now let’s compare those two options to real estate investing. Let’s say you purchase five 3/2 single-family houses in Cleveland, OH for $50,000 down (20% of value - $250,000 total in assets). The average rent for that area and property is $750/month, which multiplied by 5 homes is $3,750 (or $45,000/year) before expenses. After expenses, the first year alone will net you $3,490. In 20 years? Your total profit will be $450,700 (assuming 3% of the rent and expense increases per year). That’s about a 15% annualized return, which is very common to see with real estate.
Now, do you see why I’m so passionate about real estate investing? The numbers alone are everything you need to know to stop leaving your money in a bank and start investing in real estate where you can help your money make money in your sleep.