Hi, I’m Jess Willing, your local family-friendly realtor, and today, I want to share why real estate remains the number one wealth builder, especially for families and moms looking to secure a stable and prosperous future.
The Great Debate: Real Estate vs. Stocks
When it comes to investing, the age-old debate between real estate and stocks often surfaces. Both have their merits, but let’s break down why real estate stands out as a superior choice, especially for those currently renting.
Scenario: Stock Investment
Let’s say you have $7,000 to invest. If you choose to invest this in stocks with an annual return of 5%, here’s how your investment would grow over 5 years.
Initial Investment: $7,000
Annual Return: 5%
Investment Period: 5 years
Using the formula for compound interest:
A = 7 , 000 ( 1 + 0.05 ) 5 A = 7,000(1 + 0.05)^5 A=7,000(1+0.05)5 A = 8 , 934 A = 8,934 A=8,934
So, your stock investment grows to $8,934 after 5 years. After paying a 15% capital gains tax, your net profit would be $1,644. That’s a 23.49% return on your initial investment.
Scenario: Real Estate Investment
Now, let’s consider investing that same $7,000 into buying a home. You’re purchasing a $200,000 home using an FHA loan with a 3.5% down payment, which is $7,000. With a loan amount of $193,000 at a 6% interest rate, your monthly mortgage payment would be about $1,157.
Home Price: $200,000
Down Payment: $7,000 (3.5% for FHA loan)
Loan Amount: $193,000
Annual Home Appreciation: 5%
Loan Interest Rate: 6%
Investment Period: 5 years
Over 5 years, your home appreciates at 5% annually.
Future Value = 200 , 000 ( 1 + 0.05 ) 5
Future Value = 255 , 256
After 5 years, your remaining loan balance is about $180,752. This means your home equity is:
Equity = 255 , 256 − 180 , 752
Equity = 74 , 504
Subtract your initial investment, and your net profit is $67,504. That’s a whopping 964.34% return on your initial investment!
The Big Picture
Let’s compare the two:
- Stocks:
- Net Profit: $1,644
- Return on Investment: 23.49%
- Real Estate:
- Net Profit: $67,504
- Return on Investment: 964.34%
Why Real Estate Wins for Families and Moms
Investing in real estate not only provides a tangible asset that appreciates over time, but it also eliminates those monthly rent payments, which is a huge bonus for families and moms trying to manage a budget. With real estate, you’re not just investing in an asset; you’re investing in a home where your family can build memories and a stable future.
If you’re considering where to invest your money, think about the long-term benefits of owning a home. It’s about more than just financial gain – it’s about creating a place where your family can thrive.
If you have any questions or are ready to start your real estate journey, give me a call. Let’s build your family’s future together.