Generational Wealth Built by Real Estate Investment
Written by Paul Avery, Sales Rep at Lifestyles North – March 2022
What is to follow is a first hand account of two investments in the same amount made into two different investment vehicles: 1) Stock Market 2) Real Estate. This story is unique to me. The experience or results is the story of millions of millionaires.
In 2012 I made two investments for my family, one was the purchase of Facebook stock and the other was the purchase of a condominium in Collingwood, Ontario. Both investments cost me $10,000. Let’s cover the simple investment first.
Facebook’s IPO was in May of 2012. Before Facebook I had missed out on Google, this time I was not going to miss out, I knew how popular Facebook was because of my Internet Marketing work. With great trepidation I purchased 250 shares for $40 each making the total invested $10,000. Truthfully I was nervous. I knew the stock could go to $0, I had been burned in the past on stocks like Nortel. This Facebook stock purchase did keep me up at night.
The next investment was a purchase of a 3 bedroom, 2.5 bath condominium in downtown Collingwood at a cost of $150,000. I often jokingly say that I bought this with imaginary money. The downpayment came from our primary residence home equity line of credit and the rest came from the bank. We did not withdraw cash from our savings account to buy this. Our tenants have since paid the mortgage, condo fees, and property taxes.
Today, 10 years later, Facebook stock is worth about $222 US making the 250 shares worth about $70,000 CDN giving a return of $60,000 CDN. This works out to an annual return of roughly 21%. If you ask any financial advisor what the average historical returns for their clients have been I can bet you a coffee it will be nowhere near 21%, it will be closer to 6%. So I got lucky with Facebook stock. I felt good about myself and my stock picking powers.
Today, 10 years later, the condo is worth about $490,000, a gain of about $340,000. At the same time the principal on the mortgage has been paid down by my tenants to the tune of $50,000. This makes the total net worth increase for our family a whopping $390,000. For the sake of figuring out a return lets just assume we did put $10,000 cash down. The annualized rate of return is about 44%, double my winning stock pick and seven times an average mutual fund.
My family has built wealth for us now and for the next generation. This story is not unique to us, many have done it before. The most important piece of advice I can give you is to start. It is next to impossible to time the market, so the thing that matters is time in the market.
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