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Originally Posted by okaythen
wow is that true? for 30 years average appreciation for homes exceed flation by a little more then 1???
if that's true how come I hear all those people getting so filthy rich by investing in real estate?
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That is true. The reason people can get rich with real estate, however, is leverage. Let's look at two scenarios.
1. Invest $25,000 in stocks. Have them appreciate by 10%/year for 5 years. You will end up with about $40,000 (before taxes and brokerage expenses). You've made a profit of $15,000.
2. By a $250,000 rental property with 10% down, thus investing the same $25,000 initially. The rent collected covers all expenses to a break-even point. The property appreciates at 5%/year. After 5 years, you sell the property for about $320,000. You've made a profit of $70,000.
So the real estate investment beats the stock investment by $55,000 even though the growth rate of the stocks is double that of the real estate.